FEAR – What “should” the market look like at a true bottom? Peter Eliades is a prodigious researcher, and he has come up with some extraordinary and revealing statistics relating to major bottoms in the stock market. This following research is based on Investor’s Intelligence’s forty years of polling bullish advisors vs. bearish advisors (Investor’s Intelligence, 30 Church St., New Rochelle, NY 10801). The statistics are quite amazing.
What Eliades’ research shows is that important market bottoms have been accompanied by long periods of bearishness on the part of investment advisors. Here are some typical and rather startling examples.
In May 1970 the market recorded an important low. For 27 of the 28 weeks prior to that low, there were more bearish advisors than bullish. Actually, bears outnumbered bulls for three months even after that 1970 bottom.
Prior to the historic 1974 bear market bottom there were 27 consecutive weeks in which bears outnumbered bulls.
Again, prior to the March 1978 low, for 17 out of 20 weeks bears outnumbered bulls.
Prior to the classic 1982 bottom, bears outnumbered bulls in 34 out of 35 weeks.
Prior to the July 1984 low, bears outnumbered bulls for 19 consecutive weeks.
In 1994-95 there were 46 consecutive weeks in which bears outnumbered bulls — at the end of that period the Dow was higher than when the 46 bearish sessions began.
Then Eliades wraps it up. “Since the October 1998 market bottom to the present day, there have been only nine weeks with a plurality of bears over bulls.” In all of 2002 while the market was “falling apart” there were two consecutive weeks in July in which bears outnumbered bulls and there were two consecutive weeks in October.
The latest count as of last week shows bulls at 40% and bears at 31%. Even after a very poor January, even with the nation facing a crisis in Iraq, the bullish percentage remains stubbornly above the bearish percentage. Does this suggest that an important bottom is at hand? Does this suggest that October 2002 was a classic bottom? I’ll leave the answer to you.
