Is there another year of bullish market or the end has already occurred
The majority of investors and traders know that the current bullish market and economic expansion are in the late cycle.
However, there is still a possibility for the bullish market to continue in the next 6-12 months.
But in both cases, the long-term risk-to-profit ratio is much more important than predicting a peak at this stage in the market.
After the terrible last quarter of 2018, the markets did not stop rising. The old proverb that "stocks take the staircase up and elevator down" seems to have turned.
Now, the market "goes down the stairs and climbs up the elevator."
The foundation of the economy determines the medium and long-term movement and the outlook for markets. The technique determines the short-term trend. That's why:
1. The long-term risk ratio: market profit is no longer scourge.
2. The mid-term assessment for markets is now neutral (for the next 3-6 months)
3. The short-term trend tends towards the sword.
We focus on long-term and medium-term.
While it is a fact that the market can continue to climb, long-term risk: reward is no longer beneficial to bulls. After a certain point, this ratio is much more important than the possible long-term market direction.
"Bear Markets" = 33% + losses that continue> 3 years. For example, 2007-2009, 2000-2002, 1973-1974, 1968-1970
Some leading indicators show signs of deterioration. The usual chain of events looks like this:
The housing market - the earliest leading indicators - has begun to deteriorate. That has already happened
2. The labor market is getting worse. At the same time, the US stock market is in the long-term phase of reaching the ceiling. We are still in the early stages of this process, but the deterioration is not so strong.
3. The labor market deteriorates further while other economic indicators start to slow down. The market is definitely over and the recession has begun. There are no recession prospects for the moment.
For January 2019, S & P 500's net revenue revisions are steadily negative. This is a necessary but not sufficient condition for the beginning of a bear market and economic recession.
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