Market Minute: October 6, 2008: Major low is near - Donald W. Dony, FCSI, MFTA
As the 2008-2010 bear market continues to unfold, models are indicating the next major market low has almost arrived. Technical evidence suggests that the next important trough for global markets is expected by mid-October. Though bear markets are constructed of a series of lower lows, they are also punctuated with strong short-term advance. Past bear markets have displayed upward movements of 15%-20%.
Bottom line; Expect a low to develop within 1-2 weeks followed by increased upward pressure into November. Longer-term models still support lower numbers over the next 12-18 months.
Investment approach: During bear markets and business cycle contractions, central banks normally lower interest rates to help stimulate economic recovery. Lower rates means higher bond prices. The next 12-18 months should offer an excellent opportunity to profit from higher bond prices.
