The Average Investor's Blog

A software developer view on the markets

The Weekly Update

Posted by The Average Investor on Sep 25, 2011

The bear market grind continues slowly. The world markets have suffered pretty severe losses and it is hard to think of events that can radically change this course. Most world indexes have suffered losses of more than 16%, which is the definition of a bear market I use, and most of them, but excluding the S&P 500, have suffered losses of more than 20% – the more common definition of a bear market. And don’t forget, this is on top of the fact that we never reached the peaks of 2000 and 2007, a very, very bleak picture in my opinion. According to dshort.com, the S&P 500 is 40% on inflation adjusted basis from the peak in 2000 – talk about wealth destruction!

On top of everything, the officials in charge seem to have less and less clue what to do. Just consider: the Fed chairman apparently is seeing serious down risks to the economy, less than two months after he was expecting a higher growth in the second half! Hello, if their horizon of predictions is so unreliable – why do they control the interest rate? I won’t even comment on Europe – it’s a shame!

Back to trading. This article confirms that my interpretation of Jack Schannep’s version of the Dow Theory was correct and indeed we got a buy signal in late August, which was not a buy signal according to the more conservative interpretations. At least one of the two other Dow Theorists, Richard Russell, is for sure making a big noise of the non-confirmation between the Dow Jones Industrials and the Dow Jones Transports, so I am curious to see who will end up with a better entry this time.

The ARMA strategy is down 2% for 2011. So far, the record 13% fall in August is followed by about a 1.5% gain in September. The SPY (S&P 500 ETF) for Monday is long. 🙂

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