From the chart above you can see that the decline projected by the pattern has been fulfilled (and then some). This is the type of action that I anticipated would call for patience in the short-term.
Now that our patience has been rewarded, I’ve written over the past week or so that it seems that the negativity has gone a bit too far. This next chart shows just how far.
This is a chart of the S&P 500 going back to 1978. Overlayed on top of the stock index is the University of Michigan Consumer Sentiment Index which currently shows the most negative reading in nearly 30 years.
There are only 2 months in the past 366 that have shown a lower reading than today’s: April and May 1980. Spring 1980 was actually a pretty good time to be realistically optimistic as the stock market gained about 40% over the following 6 months:
Now I realize that “History does not repeat itself, but it does rhyme” so I don’t expect 1980 all over again. I do believe, however, that the current panic should be viewed for what it is: a rare opportunity.
From the chart above you can see that the decline projected by the pattern has been fulfilled (and then some). This is the type of action that I anticipated would call for patience in the short-term.
Now that our patience has been rewarded, I’ve written over the past week or so that it seems that the negativity has gone a bit too far. This next chart shows just how far.
This is a chart of the S&P 500 going back to 1978. Overlayed on top of the stock index is the University of Michigan Consumer Sentiment Index which currently shows the most negative reading in nearly 30 years.
There are only 2 months in the past 366 that have shown a lower reading than today’s: April and May 1980. Spring 1980 was actually a pretty good time to be realistically optimistic as the stock market gained about 40% over the following 6 months:
Now I realize that “History does not repeat itself, but it does rhyme” so I don’t expect 1980 all over again. I do believe, however, that the current panic should be viewed for what it is: a rare opportunity.
As I write this, the Dow Jones Industrial Average is making fresh, new lows for 2008. Buying into this weakness feels like taunting the big, bad mama bear. Still, I’m sticking to my realistic optimism thesis.
As I write this, the Dow Jones Industrial Average is making fresh, new lows for 2008. Buying into this weakness feels like taunting the big, bad mama bear. Still, I’m sticking to my realistic optimism thesis.
Bio: Jesse Felder founded Felder & Company in 2000 as an independent investment advisor. Jesse oversees both the company's proprietary investment research and managed investment accounts. He is also the editor of the company's monthly newsletter "The Felder Report."
