Evolution of the American market (therefore global….sniff)

[Earnie]

Hi !

In order to understand and analyze the American market (of which most of the values presented on this site are part), I carried out my first graphic analysis exercise on the 3 Dow Jones, NASDAQ, and S&P 500 indices. The most representative being of course the S&P 500. I wanted to have an overview. So I took for each of the indices the graph for a maximum temporal representation, at 10 years and 1 year (yahoo finance). On the maximum graph, the curves do not look much alike (although the temporal base is not the same, each index having a different date of birth). On the other hand, on the 10-year and one-year graph, they all have the same physiognomy.
Interestingly, since 2009, the lowest point on the S&P 500 and Dow Jones, and the 2nd lowest on the NASDAQ, the index has tripled on average in 6 years (!). A magnificent upward channel! Something unprecedented in the history of these 3 indices. This is undoubtedly due to the FED's policy of massive injection of liquidity (QE) which ends up on the stock market, following the subprime crisis. We are therefore seeing an artificial inflation of prices which no longer correspond to the creation of wealth in the real world, hence a complete disconnection from real life -> creation of a bubble.
When the correction happens, it will hurt a lot, because the gap is so huge and the slope of the bullish channel of the last 6 years is significant. The question is how long will it last before the system implodes. (With big QE blows, it could last a while longer)
We can also assume that the 2000-2001 crisis, then 2007-2008, necessarily leads us to think that the next inversion cycle is for 2015. 7 years of period, the magic number!! (wink)
We can also see significant upward and downward movements on these three curves since December 2014, representing a certain volatility in the indices, thus reflecting a certain feverishness in the markets.
All this to reinforce my strategy of not entering the market now, and to apply the first rule, patience. This gives me time to capitalize, to study the fundamental analysis and all these titles, to set up my strategy and to take advantage of future opportunities when prices collapse. What is very interesting from the point of view of the choices of these companies in this portfolio is precisely their ability to get through crises. But there is no doubt that prices will fall, even for them, but to a lesser extent.
I really enjoy doing graphical analysis (and not technical, since I have not integrated the mathematical tools, being a beginner, I will not rush the steps), and I will look at the indices of the main financial markets of the world. It will be an excellent exercise… To be continued….

What do you think? Thank you for your informed opinions.

PS: I do not forget that here, it is the fundamental analysis which is authoritative

[Jerome]

What I've been thinking about it for many months: it's going to crash. I just don't know when and what the trigger will be.
Here the situation is very clear: http://www.dividendes.ch/evaluation-du-marche/

[Earnie]

Very interesting approach too, I will study it more closely, although less intuitive for a beginner like me… Indeed, it is impossible to predict exactly when the turnaround will occur, but it confirms my choice not to enter the American market now, and by extension, the others too. I will spend time studying the figures and understanding a choice of about ten values that suit me, to finally buy a maximum of 5 lines when the crash has passed.

On the other hand, I also realize that there is a possibility that this situation of rising prices could last for a few more years, even at the other extreme.

[Author]

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