Bull Market Trend Line Says We're Back In 1987 and 2000! $SPX $SPY

The 2009-2013 bull market trend line has the exact same slope as the trend lines that led up to the 1987 stock market crash (8/1982-8/1987 cyclical bull) and the 2000 tech crash (12/1994 to 4/2000 cyclical bull). If the bull market wants to replicate those moves exactly, the S&P could rally even further from here before crashing. But we are technically still in a secular bear market, so the market is structurally different than it was in the 1980s and 1990s. Of course, to try to offset this, the Federal Reserve and central banks around the world have been printing money to prop up asset and securities prices. I think there are many catalysts that could ignite the next cyclical bear market: higher inflation (threatens rate hikes), increased credit risk and/or higher yields (expands risk premiums or reprices assets relative to the risk free rate – offset by the 'great rotation'?), a recession fueled by fiscal tightening, or even just higher commodity prices. The chart of the S&P only goes back to 1970.

Source: FreeStockCharts.com

Here are three recent perspectives on the stock market from hedge fund manager Doug Kass, technical analyst Scott Redler, and economist Gary Shilling. I was watching Mad Money the other day and Jim Cramer mentioned that Scott Redler, chief strategic officer at T3 Trading, believes the market will break above the 2000 and 2007 highs and hit 1,700 by 2015. So he believes that the 13-year secular bear market is coming to an end. So there is the bull on the post. Watch the CNBC video.

On the other hand, Gary Shilling, president of A. Gary Shilling & Co., thinks a market shock (oil spike or effect of fiscal tightening) will send S&P operating EPS down to $80 and the S&P 500 down to $1,040 based on a multiple of 13 (the average bear market multiple at the low). He keeps upping his target on the S&P as the Fed-backed "risk on" trade drags on, so I'm thinking he might revise his estimates lower when a shock and recession occurs. He's going against very high 2013 and 2014 S&P EPS estimates, which are currently at 111.5 and 126.69, respectively (via S&P).

Finally, yesterday Doug Kass of Seabreeze Partners told CNBC that believes we are headed for a "sharp fall." Via CNBC:

"I would raise cash. I'm getting the Summer of 1987 feeling in the U.S. equity market, which means we're headed for a sharp fall," he said. "I would be in cash, or you're facile enough, I would be short. I'm at my highest net short position I've been this year."

Related posts:
1) Tom DeMark: Official S&P 500 Sell Signal Near! (Part 2)
2) UBS Technical Analyst Peter Lee Says S&P Bear Market Far From Over (via King World News)
3) Citi's Tom Fitzpatrick: Dow Falls 20%+, Gold Soars to 2,400 and Initial Jobless Claims Rise
4) S&P 500 Bull Market Breakdown Watch (Chart) $SPY $SPX
Recommended posts powered by Google