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Thoughts on when the next bull market might start

September 5, 2022

Obviously I have no idea when the next bull market might start but we can speculate. Back in the day the rule of thumb was that bear markets lasted two years. That would take us through to early 2024 so here’s hoping that rule is no longer applicable. I think it was based on crop cycles so probably isn’t too relevant in the smart phone era.

Two of my indicators, golden crosses on the moving averages and trend line breaks, happen when they happen and may only trigger rallies within the bear market rather than the beginning of a new bull market.

A better one for giving us an important signal is Coppock, which was explicitly designed to do just that and has a remarkable track record of success. At the moment almost every Coppock indicator that I look at is falling. However they are reaching one important staging post in that many of them are becoming negative.

Mr Coppock, the eponymous inventor of the indicator, regarded becoming negative as an important precondition for a new bull market. The Coppock for the Nasdaq 100 is minus 7.7 for August and would be approaching minus 200 by December 2021 at current levels of the index. For reference the Coppock indicator for the S&P 500 reached minus 80 in 2009, the depths of a savage bear market and is around zero presently.

The Coppock for the Dow Jones is minus eight presently, fell to minus 71 in 2009 and to minus 125 in 1932. If its latest level was maintained through December 2021 the Coppock indicator for the Dow would reach minus 95.5, lower than 2009 and approaching the deep low point of 1932.

The implication of all this is that absent a dramatic rally by the indices we are already on course for Coppock to reach levels in 2022 in line with historic low points for earlier deep bear markets. So one simple thesis could be that by the end of this year Coppock will be low enough that not only will the next big move be up, that is almost certain to be the case but also that it might be close.

So, a reasonable working assumption could be that an important new bull market could get underway in the early part of next year. We don’t have to act on that assumption but it makes a useful talking point. It also suggests that the next buy signal will be an important one, perhaps up there with the great buying opportunities of the century.

Buy signals in the 1930s were overshadowed by the emergence of fascist regimes in Europe, notable the one under Hitler which led the world into a devastating six year war. This time around for all the present gloom about the energy crisis, the war in Ukraine, soaring inflation and numerous other worry points we have the backdrop of the accelerating technology revolution referenced by the quotes about Snowflake and the data explosion in the last issue of Stock Chart Selections (formerly Chart Breakout).

I have also been reading more about electric cars. Tesla expects production to be running at 2m cars a year by the end of 2022 and a Chinese company called BYD, expects to make 4m electric and hybrid cars next year. That’s 6m cars out of an estimated global production around 80m cars so these guys are starting to have an impact quite apart from all the other electric car makers like Nio, Li Auto, Rivian, Lyft and the fossil fuel car makers switching their attention to electric vehicles. I love my BMW i3 by the way and have seen three others in Saffron Walden plus an amazing number of Teslas. In the tiny group of houses where my property is situated there are three electric cars, two bought in the last week so this revolution maybe really is starting to happen. I know, you probably didn’t realise how important Castle Hill, Saffron Walden was as a bellwether for the global economy but there you go.

Strategy

Like all of you I find this continuing bear market immensely frustrating. I rely on my stock market winnings to fund my life style so present conditions are a real pain but as my cleaning lady remarks when not everything turns out as she would have wished ‘it is what it is’. It is amazing how that simple expression covers everything, death, divorce, bankruptcy, war, famine, pestilence you name it. Humanity takes all this on the chin and somehow manages to press forward – onwards and upwards buoyed by unquenchable optimism and the human spirit.

So however bad it gets remember it is a passing phase and the bull will return, probably bigger and better than ever.

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