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MYERS ON FUTURES
Prepared by Steven R. Myers
Long-Term S&P Bear Market
A long-term S&P bear market is what I believe the charts are now telling us! This long- term bull market has topped out in a rather common fashion. The bear market will also be a rather normal bear market. The bulls get hurt time after time in a bear market just like the bears have been hurt for the last few years. Most bull markets will finally top after all the bears have given up. Many of the bears and fence sitters have finally turned bullish. There is an old saying that a market will do whatever it has to hurt the most people. This is because the majority is always wrong. They have to be! The public is right during the last run of the super moves. This multi-year upmove in the S&P has been a super move. The public was right during that last run, but the public will be wrong before they get out. It was a rather astonishing fact that the public was lining up to open accounts to buy into the market on the recent black Monday. They had been conditioned to do that from the last black Monday 10 years ago! They did the opposite then and they were wrong. They missed a big move. They want in after the market has proved that it could go up for ten years.
The public buys all the way down in a bear market. Isn't a bear market a better buy every month that it gets cheaper? No! No! No! It is a better sell! You have a stronger trend the longer and further it goes in that direction! I do not expect a bear market to wreck the economy or have any major affect on commodities. The S&P doubling had no major affect and it dropping in half over time will have no major affect. Markets will move on their own fundamentals in the long run. There should actually be some of that money that looks for a 50% possible gain come out of the stocks and back into commodities.
Always comes back! I cringe anytime I hear a trader use the word always. I know that some market has conditioned him enough to slaughter him. Perhaps that market has always came back before then. His buying will be the signal that all the possible buyers have bought and then there is no buyers left. It is very noble of the brokers upping their percentage of stocks lately to try and support this market. Nobody can support a market for long! It is a shame that their first objective is not to protect money. That has to even come before the goal of making money. The don't want the game to be over that has been so good to them! I am using the stocks as an example. A market is a market! Public psychology works the same in all markets. All markets have different stages. We can learn from this classic stock market top and put that knowledge to use in commodities. There appears to be a very good alternative for those stock players. Bonds are proving it's uptrend. Perhaps 100% in something safe is better than stocks. The stock market appears to have topped out on its 10-year anniversary of the 1987 bottom. Within a few days. The S&P appears headed down enough to change this largest year into an unchanged year!
A spread opportunity long bonds/short the S&P!
Another spread opportunity–long the pound and short the yen.
I still like just short the yen or the Australian Dollar. They are becoming nice downtrends!
Spreads will sometimes provide some protection. Spreads will also sometimes allow you to profit on both things. A time may be coming up to protect these two short positions with some other currency long. It is best to stay with long-term trends anyway you can.
Trends Take Time To Develop!
Markets do not turn on a dime for any more than a correction! It will generally take a few months to turn a trend. It generally takes longer to turn a bear market than a bull market. The S&P has not made any headway for 5 months. That can qualify for a definite change of a bull market. Some bull markets can top out in just a few days. This will generally be the bull markets that have been going for less than a year. Bear markets will generally be slower in turning and have more setbacks. A 50-day moving average line can be quite helpful. It can confirm that a bull market is beginning when it also turns from sideways to up. Bull market spikes will lack momentum in the early going and will give way to dips back to the 50-day uptrend support line.
Bull markets will have a lot of skeptics in the early going.
A couple long-term bull markets that are beginning on the long-term weekly and monthly charts are sugar and cocoa!
These two markets are trying to move out of some overwhelming supply situations. The fact that the price of each has gone up a bit over the last few years proves that demand is starting to overcome supply. Slowly so far. A market that improves in price by perhaps $1,000 per year for 5 years is showing some bullish fundamentals. Such a market will normally gain upside momentum and start a faster bull market. Such a market will need to do just that or another setback and rest period will develop. We may be nearing the point in sugar and cocoa where they would normally start gaining some upward momentum. This is a time that one can start to pyramid add to a winner and really have some potential. Stops and watching your risk is important at all times. You will be stopped out of many fine markets for the sake of safety. Sometimes at a loss and sometimes at a profit. This is all in anticipation of the one market that moves just right for you. It can be worth waiting for. The trick is to still be around and alive when that move comes!
November 7, 1997Steven R. Myers
Myers On Futures Co.
P.O. Box 777, Summerfield, Florida
Copyright 1997, by Consensus Inc. All American and Pan American rights Reserved. editor@consensus-inc.com
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