Down goes the Dow

Why care what Hussman forecasts?

http://www.etf.com/sections/index-investor-corner/23004-swedroe-why-care-what-hussman-forecasts.html?nopaging=1

“At its core, speculation is about psychology. It’s about waves of optimism and pessimism that drive fluctuations in price, regardless of valuation. Value investors tend to look down on speculation, particularly extended periods of it. Unfortunately, if a material portion of one’s life must be lived amid episodes of reckless speculation that repeatedly collapse into heaps of ash, one is forced to make a choice. One choice is to imagine that speculation is actually investment, which is what most investors inadvertently do. The other choice is to continue to distinguish speculation from investment, and develop ways to measure and navigate both.”

John Hussman, April Market Commentary

“Hussman is a very bright man. He provides compelling analysis and opinions, which I typically find quite interesting. The only problem is that the evidence, including his own track record, demonstrates that investors are best served by ignoring his opinions.”

Larry Swedroe

“Having correctly anticipated both the 2000-2002 and 2007-2009 declines, and their extent (including my March 2000 projection of an 83% loss in technology stocks), one thing I’ve learned is this. By the end of a market cycle, nobody complains about having been defensive “too early.” I expect that the completion of this market cycle will take the S&P 500 to the 1000 level or below; an outcome that would essentially bring the most reliable valuation measures we identify to their run-of-the-mill historical norms. That outcome would be sufficient to wipe out the entire total return of the S&P 500 since 2000, and the entire total return of the S&P 500, in excess of Treasury bill returns, all the way back to October 1997.”

John Hussman, April 2018 Market Commentary

Good night infatuated one.

qui soin wrote:

Who gives a crap? Where will it be on 3/4/19 or 3/4/20 is what matters.

Probably 1930s depression levels. Once those interest rates keep rising and cheap money dries up, it's going hard for debt-driven people to keep financing a new home every 5 yrs & a new car every 3 yrs. Demand goes down...manufacturing goes down...layoffs explode...people foreclose & file bankruptcy...depression days all over again...no surprises there. Oh boy...what is the mastermind Trump going to do then. ?

Hypocrite detector wrote:

You use almost as many handles as that guy you harass.

I can use as many handles as I want. ?

Ghost of Igloi wrote:

Good night infatuated one.

Again you reply to yourself. Interesting.

OK, here's a start. I mentioned I got curious about the predictive power of the so-called "death cross," which is used as a technical indicator and occurs when the 50-day moving average drops below the 200-day moving average. So far as I can tell, technical analysts use this as a sell signal, with the presumption that it indicates an expectation that stocks are about to drop. There is also its reverse, the so-called "golden cross," which happens when the 50-day average moves back above the 200 day average, and is a signal to buy because stocks are expected to rise. The following image illustrates the two concepts:

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http://i68.tinypic.com/2nbhpxy.jpg[/IMG

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I downloaded S&P 500 daily data from 1950 onward and did some basic analysis. There were 17167 trading days over that period, during which there were 53 death cross occurrences and 54 golden cross occurrences. If these signal something, we should be able to discern a difference between random expectation (i.e. expectation of forward index value for any randomly selected day) and that expected after one of these holy cross events. I looked at 1, 3 and 6 month, 1, 2, 3, 5 and 10 year changes following each cross occurrence, and did the same for every trading day, then compared the datasets. Here are some simple stats:

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If you look carefully, you should conclude that the cross patterns are perfectly useless for predicting the future. There is absolutely no meaningful statistical difference between expected forward-looking change following a holy cross versus that of any random day.

So what can these patterns tell us? They average past index values, so they ought to be able to tell us something about past market behaviour. To check that, I looked rearward to see the changes leading up to the cross events, and compared with average. Here is what I found:

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http://i63.tinypic.com/2dlk8dt.jpg[/IMG

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Here we can see that the death cross is usually preceded by a market decline (typically ~ 5% over 1 to 2 months), and a golden cross is usually preceded by a ~ 5% rally over the previous month or two.

So there you have it. These cross patterns have some "predictive" power if you're interested in hind-casting. They have absolutely zero predictive power for forecasting future index values.

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I learned some cooler stuff during this exploration and will share that when I find time. Need to put in a full day at work first...

IDIOT investor wrote:Here we can see that the death cross is usually preceded by a market decline (typically ~ 5% over 1 to 2 months), and a golden cross is usually preceded by a ~ 5% rally over the previous month or two.

And just to be clear, that shouldn't be a surprise, that more or less flows directly from the basic mathematical construction and ought to be intuitive at the outset. The absence of any forward predictive power was a little surprising, and seems to support the notion that index values have absolutely no memory, and (appear to) fluctuate entirely at random. Of course it's not random, strictly speaking, there are factors influencing stock prices in the short and longer term, but the collective behaviour is such that market fluctuations appear to be almost entirely random. I say "almost" with purpose and will elaborate on that point later when I get into the juicier stuff I learned...

Donkey drop wrote:

Ghost of Igloi wrote:

So what’s the point?

I think he’s just pointing out another of your endless lies.

I think he is just eliciting more responses from you to illustrate the underlying point. You are dumb as dirt. You really are,

You all are behaving like a bunch of children. GOI and all his many tormentors included. I wish you'd all grow up and give it a rest to improve the signal to noise ratio

What are the betting odds market up or down by the end of the day?

Brighto wrote:

I think he is just eliciting more responses from you to illustrate the underlying point. You are dumb as dirt. You really are,

You just finished a sentence with a comma.

qui soin wrote:

[quote]mellon wrote:

Where was the Dow on 3/4/2014? What is it at today?

Who gives a crap? Where will it be on 3/4/19 or 3/4/20 is what matters.

That's correct! For those investing under the doomsday scenario for the past 3 - 5 years, there's no sense looking back on missed opportunities. At this point, you might as well sit back and wait. Hopefully, that major correction of 40-60% happens before long. I'm sure it's just around the corner.

Not many know this, but ex the US, stock markets have gone nowhere for 10+ years.

The tricky part is to figure out if this is bearish or bullish.

agip wrote:Not many know this, but ex the US, stock markets have gone nowhere for 10+ years.

The tricky part is to figure out if this is bearish or bullish.

I don't know much, but that is one thing I know. Most of my portfolio has always been outside the US, since I'm not from there, and its market is largely a mystery to me. The DAX came close, but Shanghai was a miserable failure since January 2008:

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(indices set to a value of 1 in Jan 2008 as a basis for comparison)

Toronto (TSX) and Brazil (IBOVESPA) were similarly turgid:

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http://i65.tinypic.com/2dak61h.jpg[/IMG

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agip wrote:

Not many know this, but ex the US, stock markets have gone nowhere for 10+ years.

The tricky part is to figure out if this is bearish or bullish.

And how much global QE is in the system? I believe the figure is $21 Trillion.

Ghost of Igloi wrote:

Your infatuation: Go Pats Guy, Oh, Snap, Stanley Morgan, Barney Smith, Gruntz, Portia, oh how many others.

You really are nuts.

Igy

Once again may I ask why I am included in list post? I honestly don’t get your point.