Up until the end of 2016 we have been in a historically low growth market and the market has moved sideways for 16 years.
Despite what the bears have been saying we have not been experiencing a strong bull market at all until 2017 when I believe the newest bull trend has started which will break into a 10-15 year long term growth cycle.
recent 5 year bull trends = weak markets
2003-2008 - 75% gain (followed by a crash )
2010-2015 - 90% gain
This is very slow growth based on history!
previous 5 year bull trends = strong markets
1982-1987 - 232% gain
1995-2000 - 215% gain
5 Year Bull Trends
Bullish trend price channels last about 5 years and are followed by an appropriate correction or consolidation such as - Quick Crash 1987, Flats 1994 and 2015, Bear markets/crash 2000 and 2008 .
Applying some wave analysis each 5 year bull run can be broken down into a impulse wave followed by an ABC correction. The 2nd wave ( the first correction ) occurs about 1 year into every new bull price channel cycle. We are currently about 1 year into our most recent bull trend that started in 2017.
Long Term Market Cycles
Going back in time the market generally cycles in 15-20 year flat periods with below average returns and multiple crashes ( shown in the orange boxes ) followed by strong 15-20 year growth cycles with above average returns with much softer corrections after each 5 year bull trend.
Are there any bear signs?
Looking at both the 2000 crash and 2008 crash we had ample warning signs a bear market was coming 6 months to a year after the peak and were less then 10% down from the peak, very strong signs to exit! Our current chart has no resemblance to any previous bear markets and is showing no indicators of entering a bear market yet.
Economic Signs
-The current millennial demographic is now one of the largest age demographics and are in the work force. They are at a similar age the baby boomers were in the early 1980s.
-The most recent quarterly earnings have been very strong so far. Of the about 50% of companies in the S&P500 that released earnings 80% beat expectations compared to an historical average of 64%
-Some of the largest companies are still fast growth companies ( recent revenue growth examples AMZN 38%, BABA 56%, GOOG 24%, BIDU, 29%, PCLN 20%, FB 47%, NFLX 33% ) Profits are all increasing as well.
-We will start seeing the effects of the tax cuts in the coming years. This extra cash can be used for share buy backs, dividends, acquisitions etc.
-possibly over 1 trillion dollars repatriated into the USA from overseas. Apple alone is bringing back 285 billion. This opens big possibilities for large mergers and acquisitions, more jobs, expansion, share buy backs.
-many more including technological breakthroughs, globalization, emerging markets developing creating a new middle class of billions etc. All which have happened during the previous long term flat market but we have yet to see the growth from.
-Most large US companies are multinational conglomerates. 30% of the US markets sale come from foreign markets and should only increase as foreign markets continue to develop.
Conclusion
It is more likely we are in a similar situation to 1984 where 1 year after breaking out of the previous extended flat period we experienced a 16% correction before getting a 1100% return over the next 15 years.
The market in 1982/1983 went almost straight up for 1.5 years and looks very similar to our chart looks today, the first correction is also very similar being over 10%. Going forward all long term signs point to a very strong bull market. It is possible the correction could go down a little further or the correction could last a few months before reaching new highs but seems highly unlikely we are entering a bear market.
Based on the long term market cycles price targets may be around the following ranges.
Year 2022 - 45,000 DOW
Year 2035- 250,000 DOW
Despite what the bears have been saying we have not been experiencing a strong bull market at all until 2017 when I believe the newest bull trend has started which will break into a 10-15 year long term growth cycle.
recent 5 year bull trends = weak markets
2003-2008 - 75% gain (followed by a crash )
2010-2015 - 90% gain
This is very slow growth based on history!
previous 5 year bull trends = strong markets
1982-1987 - 232% gain
1995-2000 - 215% gain
5 Year Bull Trends
Bullish trend price channels last about 5 years and are followed by an appropriate correction or consolidation such as - Quick Crash 1987, Flats 1994 and 2015, Bear markets/crash 2000 and 2008 .
Applying some wave analysis each 5 year bull run can be broken down into a impulse wave followed by an ABC correction. The 2nd wave ( the first correction ) occurs about 1 year into every new bull price channel cycle. We are currently about 1 year into our most recent bull trend that started in 2017.
Long Term Market Cycles
Going back in time the market generally cycles in 15-20 year flat periods with below average returns and multiple crashes ( shown in the orange boxes ) followed by strong 15-20 year growth cycles with above average returns with much softer corrections after each 5 year bull trend.
Are there any bear signs?
Looking at both the 2000 crash and 2008 crash we had ample warning signs a bear market was coming 6 months to a year after the peak and were less then 10% down from the peak, very strong signs to exit! Our current chart has no resemblance to any previous bear markets and is showing no indicators of entering a bear market yet.
Economic Signs
-The current millennial demographic is now one of the largest age demographics and are in the work force. They are at a similar age the baby boomers were in the early 1980s.
-The most recent quarterly earnings have been very strong so far. Of the about 50% of companies in the S&P500 that released earnings 80% beat expectations compared to an historical average of 64%
-Some of the largest companies are still fast growth companies ( recent revenue growth examples AMZN 38%, BABA 56%, GOOG 24%, BIDU, 29%, PCLN 20%, FB 47%, NFLX 33% ) Profits are all increasing as well.
-We will start seeing the effects of the tax cuts in the coming years. This extra cash can be used for share buy backs, dividends, acquisitions etc.
-possibly over 1 trillion dollars repatriated into the USA from overseas. Apple alone is bringing back 285 billion. This opens big possibilities for large mergers and acquisitions, more jobs, expansion, share buy backs.
-many more including technological breakthroughs, globalization, emerging markets developing creating a new middle class of billions etc. All which have happened during the previous long term flat market but we have yet to see the growth from.
-Most large US companies are multinational conglomerates. 30% of the US markets sale come from foreign markets and should only increase as foreign markets continue to develop.
Conclusion
It is more likely we are in a similar situation to 1984 where 1 year after breaking out of the previous extended flat period we experienced a 16% correction before getting a 1100% return over the next 15 years.
The market in 1982/1983 went almost straight up for 1.5 years and looks very similar to our chart looks today, the first correction is also very similar being over 10%. Going forward all long term signs point to a very strong bull market. It is possible the correction could go down a little further or the correction could last a few months before reaching new highs but seems highly unlikely we are entering a bear market.
Based on the long term market cycles price targets may be around the following ranges.
Year 2022 - 45,000 DOW
Year 2035- 250,000 DOW