What signs should we look for to tell us when this market is officially turning?
Answers
3943 points
MNSL answered 9 months ago …
I think different countries will recover in different times due to current credit mess, over exposure to housing market, collapse of export markets, collapse of commodity prices and collapse of big financial institutions’ etc.
Recovery will take not months, but probably years for some countries. Some countries will recover quickly.
First of all capital market should be recovered. Some of the signs that we should look for capital market recovery are:
When the pace of deleveraging moderates
When lending improves
When market players confidently started to look markets again
We are not there are yet. We can not expect fully recovery in the short run except sector based bull markets and bear rallies. We will have stagflation as well.
The coming year will bring more job losses, bankruptcies, foreclosures, cutbacks. Consumers and companies will spend less, save what they can.
Above all, watch for signs in 2009 that big institutional investors in particular are willing to take more risk, such as small-cap stocks, municipal bonds, and emerging international markets.
We must not forget current recession is most intense U.S. consumer recession of the past six decades.
According to Moody's Economy.com, a research firm, as many as 7.3 million homeowners are expected to default on their mortgages between 2008 and 2010.
Once we see market recovery we will see gradual economic recovery. Followings are some signs for economic recovery:
1. When consumer spending picks up
2. When GDP growth stabilizes and improves
3. When unemployment rate decline
4. When declining oil prices stay for sometimes
Oil prices need to remain below $60 a barrel for this to continue to happen.
Finally we see some recovery in other assets including property prices. At this stage consumers will have more jobs and more income. Banks will begin to lend money to buy assets.
However we can not expect bubble asset prices for the coming decade. We will see more volatility in all types of markets in the next 10 years.
989 points
rvilmur answered 9 months ago …
A quick way to get a feel for a real turn in the stock market and the leading commodity markets is to watch the CRB index. To see how this is useful watch the video at this link for free http://www.ino.com/info/286/CD155/&dp=0&l=0&campaignid=3. Any rise in the stock markets that is not confirmed by a rise in the CRB index is probably just a bear market rally.
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2082 points
alanj answered 9 months ago …
Use the 39 week simple moving average on either the DOW or the S&P 500. I prefer the 500 (SPX) or the ETF (SPY). When the MA turns up, the market will most likely continue up. It does lag a bit, so you won't catch the very bottom, but close enough that you can ride it up.
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