How do I know when its 1999-2000?

Discussion in 'Trading' started by eagle488, Nov 15, 2006.

  1. I feel we are on the verge of another multi-year bull run. However, I would like to take this moment to carefully review how we can tell when we have hit 1999 and to pull our cash back into more conservative investments and trades. This discussion is beneficial for everyone. If I remember correctly, even professional fund managers got killed during those times and didnt know when the time was to pullback to cash. Most notably, Fidelity, where their losses were in the billions.

    Every week, I have a strategy session in which I review the P/Es of various indexes and compare them to historical averages. In fact, I am going to construct a charting program on Excel so I can better see the differences.

    My thesis is that there is a point in which the P/Es will get alarmingly high and that will be the signal to pull back.

    Give me your thoughts and ideas on how you would spot the market getting too out of control to the point where you would pullback your investments.

    In a seperate type of market, real estate, I had noticed many people "flipping" houses. I had theorized that these people probably did not know when the high of the market was going to be so they quickly threw the houses up for sale trying to collect the cash.

    (Of course there are short and put plays as well that can be played to counter a bear market)
  2. General consensus in the market when we are ultra super mega bullish and there is no top in sight. I think that people still remember the bubble bust and will always keep that in the back of there head. When we start seeing market news on your local television station and how you can make money in it or there is a TV similar to flip that house it time to push the sell button. It probably won't happen again until we get a revolutionary change in some new type of technology. Tenchincal indicator will confirm this.

  3. Its funny you said that. I was listening to Bloomberg radio in my car and a commercial comes on for some type of loan company where you can take out loans using the equity in your portfolio.

    This is something new to me. I watch CNBC and listen to Bloomberg all the time. I also go through the financial websites daily. I have never seen this type of loan before in my lifetime. Maybe it was offered by someone before, but I have not seen it on any major news sites or channels.

    The commercial was alarming and I was thinking would the type of person who listens to Bloomberg take out this type of equity loan. I mean, Bloomberg radio is this smoky boring old fashioned type stock market broadcast. Would someone who listens to this station actually go out and take a loan out on their portfolio?

    Another question to ask ourselves is if someone was sophisticated enough to build a portfolio, why would they fall for this portfolio equity scam?

  4. 2000 was a true bubble. This type of bubble will typically happen only once in a lifetime. The reason for this is quite simple. Memory. People that were around the markets and got burned will never allow themselves to be put into the same position again. 2000 was actually very easy to see coming because fewer and fewer stocks kept the indexes going higher.

    No one can protect themselves from a huge decline that occurs over a day or two, but you can protect yourself from that little decline that turns into a huge decline over a period of weeks or months. The key is looking at overall market internals. Find various factors and weight them by importance. (McClellan Summation Index, advance/decline line, short term composite, etc). After finding your important factors manually backtest them for each market period with a 5% correction or more. Find the weight that would get you out of the market as early as possible with the least amount of false signals. I know this is curve-fitting but it still works.
  5. Bloomberg people probably would not.

  6. How do you know when? Pay attention to the weekly and monthly charts. Most traders forget those time frames.

  7. I agree that bubbles of such caliber do not come too often. Etoys was selling for multiples of toys t us, and it only had 25 mil in revenue vs few billions of toys r us.

    I thought that during last summer, the new bear market has began apparently not. It really do not matter to me bull or bear since I play both side and that is on intra day level.
  8. lol we've been in a bull market for over 4 years we're you been. the dow is up 5000 pts in that time. the difference is we're starting the 5th year of this advance and chances are earnings going forward will be very hard to beat after 4 huge years. not to mention at some pt the housing slowdown could affect the economy broad you have huge showdown with iran next year as lameduck bush will go after them.after so many years up with no real corrections i'd be very careful over the coming year chasing.
  9. O.P.

    When companies that have no legit business model flood the markets in IPO's and companies that pay good, solid dividends can't go up even when they raise them. When your next door neighbor wants to talk stocks with you whenever he sees you. When you go into a doctor's office and the nurse is daytrading at her station in between patients.

    This latest run is nothing, I repeat nothing like "The Bubble". The fact that every other post on ET is absolute bearish, short sentiment only proves to me that this market has more upside than downside. The fact that dividends are taxed lower than ever and those companies that are paying them ACTUALLY have cash to reward their shareholders with speaks VOLUMES! Valuations are lower than historic averages and balance sheets are stronger than ever. Why invest in Enron when Altria is stroking highs. Why speculate on the Internet with crap when Google is ruling the zone and just printing cash?

    I've said this before and I'll say it again, you can't have a correction when you have nothing to correct off of. Terrorist attacks and natural disasters have depleted this market of any pent up volatility. All those that were going to panic and sell did so long ago, leaving professionals to fight for each others bankrolls.

    The pullback in the housing markets will bring the idiots back that are flush with cash. You should have been buying all this year after the spring pullback and now starting to sell those positions to those that are buying more near the top than the bottom.

    Looks like many have more to learn. This market isn't "expensive" nor hyper-inflated. You will know when that occurs when every post here on ET is bragging about how their making a killing on the long side.
  10. I think we're already in the expanding bubble mode
    Stock bubble grow much faster than house bubble.
    I think it will continue for one year and burst in the next August

    Pay attention - September was very good, October perfect and November is even better
    Nasdaq grows faster and faster. More than 100 points in 10 days including week end.
    I think we can hit 3000 by the end of this year. And 5000 by summer.
    Then it will take another month or two to get to 7000
    And after that it will be short kingdom.
    But every long ill have plenty of time to sell off
    #10     Nov 15, 2006