It Is Not That Simple
Before you look at the charts below and say "hey this is easy...now is the
time to buy", keep in mind the first two charts show similar CCM
Market Model readings within the context of a bull market. The same model
readings were present numerous times between October 2007 and March 2009
(a bear market). Nothing says 2015 cannot flip into a bear market, which
means we have to remain open to all outcomes (good and bad).
If The Evidence Improves...
The blue arrows show similar CCM Market Model readings (2003-2007) to what
we have seen in the past few days. During a bull market with more conviction
than the current bull market, low model readings were followed by impressive
gains in stocks, telling us to keep an open mind about bullish outcomes in
2015.
This Chart Is Probably More Like 2015
The last few years of the current bull market have been fueled by record low
interest rates and have featured somewhat tepid conviction and confidence
in central planners. Notice in 2010 and 2011 during "crisis periods", bottoms
tended to be a multi-month process rather than the sharp reversals between
2003 and 2007.
Compare and contrast how long markets remained in a weak technical state in
the two bull markets; compare the number of blue arrows before a rally was
successful. The recent clustering of blue arrows speaks to waning confidence
in the economy and central planners (investors are more skeptical). The higher
degree of skepticism may also result in a much harsher bear market the next
time around. People may be willing to run for exits much faster in 2015 than
they were in October 2007. The million dollar question is "when could that
process begin". It may have already started; it may not start for several
years.
How Can This Help Us?
We are currently in a bull market until proven otherwise, meaning the bull
market analysis remains relevant for now. The present day readings of the
CCM Market Model simply tells us to be ready to redeploy cash if/when the
hard evidence begins to improve. There is no need to guess or anticipate.
If a sustainable rally occurs, the evidence will improve. If a sustainable
rally does not occur, the improvement in the evidence will be muted/contained.
The difference between the bull markets (2003-2007/2009-2014) and the low
readings found in early 2008 is the hard evidence began to improve significantly
during the bull markets, which was not the case in 2008. Therefore, as always,
the hard evidence, price, charts, and model will continue to guide us. If
we see enough improvement, we will take action. If we do not, we will remain
patient.
