The Efficient Market Theory states that it is impossible to “beat the market” because share prices always incorporate and reflect all relevant information as soon as it becomes available. Implicit in this theory is the condition that all market participants receive and act on all relevant information at the same time. Of course, this notion is silly and is not true.
The current bull market celebrated its fifth birthday earlier this week and brings up the question as to how long it will last. In order to answer this question, we would need to know when the next bear market begins. VectorVest did it in 2007. Can we do it again?
A bear market is defined as a 20% drop in a major index, e.g., DJIA or SPX, which lasts at least two months. The last bear market began on October 10, 2007 when the DJIA and SPX closed at bull market highs. The Price of VectorVest’s Market Index Composite closed at an all-time high of $31.44 on July 13, 2007; then it hit an intraday high of $31.84 on October 11, 2007. VectorVest issued a Confirmed Down (C/Dn) signal on November 1, 2007 and I wrote an essay on Contra ETFs on November 2, 2007.
The Major Indexes began the week modestly lower Monday as concerns over the global economy deepened following a weak trade report out of China and lukewarm growth in Japan. The Dow dipped 0.2%, while the S&P 500 lost a meager 0.05% and Nasdaq lost a slight 0.04%.
Stock prices got punished in the first session of the week as tensions between Russia and Ukraine escalated. The Dow faltered by 0.9%, while both the S&P 500 and the Nasdaq lost 0.7%.
Geopolitical unrest dissipated Tuesday after Russia pulled troops back from the Ukrainian border and investors celebrated by going on a buying spree sending the Major Indexes into record territory.
The Markit Services PMI Business Activity Index fell 3.4 points to 53.3 in February, marking the lowest level seen since October 2013.
The Markit Manufacturing PMI Index gained 3.4 points to 57.1 in February, marking the sharpest improvement since May 2010.
Everyone wants a bargain, but some bargains can cost you. In fact, they can hoover away thousands of dollars in lost profits and years of your time… time spent waiting… and waiting… and waiting some more for these bargain stocks to finally realize their potential. Oh, and did I mention, that’s only IF they realize their potential, which is by no means guaranteed.
Dr. Bart DiLiddo, founder of VectorVest, writes about his own problems with P/E ratios and what he did to solve them.
The Major Indices began the week with a bang as investors cheered merger & acquisition activity and a better-than-expected German Business Climate report. The Dow ended the day 0.6% higher, the S&P 500 also closed 0.6% in the black, just shy of its January 15th record close and the Nasdaq ended 0.7% higher, a 13-and-a-half-year high.
GDP grew at an annual rate of 2.4% in the fourth quarter of 2013, slightly lower than estimated growth of 2.5%. Durable Goods Orders fell 1.0% on a monthly basis in January, whereas consensus pointed to a steeper drop of 1.5%. Ex-transportation, Durable Goods Orders rose 1.1% month-over-month in January, beating forecasts which pointed to a 0.3% decline.
Consumer Prices grew by 1.6% on an annualized basis in January, compared with the previous month’s annual rate of 1.5%. Meanwhile, Core CPI, which excludes food and energy, rose 1.6% annually in January. Producer Prices rose 1.2% year-over-year in January, while Core PPI grew 1.3%.
After being closed for President’s Day Monday, the Major Indexes began the trading week mixed on Tuesday as investors digested another round of downtrodden economic data and news that Actavis agreed to acquire Forest Laboratories. The Dow faltered 0.2%, led by poor results from Coca-Cola (KO). Meanwhile, the S&P 500 picked up a modest 0.1% and the Nasdaq rose 0.7%, its eighth straight winning session.