Zanzibar,A lot of people will say that you are dreaming, but I...

Zanzibar,

A lot of people will say that you are dreaming, but I think it is actually a very realistic picture of what is about to happen. I am no chartist, but it looks reasonable. Certainly if we break down through 7000, it will look more likely.

I am predicting the middle of next year to be the bottom. This will represent roughly 2.5 years peak to trough. The impact of the baby boomers will play a role here that could even see the lower resistance level broken and sub 4000 seen. When their assets keep declining, they are going to hoard money like crazy. The times of the grey nomad may come to an end. Given they are such a huge part of the population band, this will have a severe impact on the velocity of money and we could see big time deflation. This will self re-inforce itself as people hoard more (especially the boomers) and cut spending to an absolute minimum. With limited scope for additional income through work, I think this will come to fruition and will reinforce itself into the psychology of society for a while just like in Japan post 1990.

I have been reading http://market-ticker.denninger.net/. He provides a good indicator and suggestion for when to get back in the market - when the 20W moving average crosses back above the 50W moving average by around 1%, this has been a great tell that we are moving back to a bull market. I am not a trader, but this indicator seems to be pretty decent medium term indicator - a time frame I am more comfortable with.

Personally, I think buy and hold will not be a good strategy for a while. You just need to look at Japan - lots of big rallies, followed by even greater bear falls. A buy and hold strategy there would have got you a big fat nowhere. Investing from here on for me will be one of look for a reasonable bottom indicator, move all in, wait for a top indicator, move out for a while, repeat.

Everyone is assuming the great bull will come roaring back after this. It might - I don't dispute that especially if international trade continues and isolationism does not manifest - but I think there are circumstances at play here that will inhibit a quick return to a normal market.