We have never seen a bear market last only 27 trading sessions — and I’ve been a student of the U.S. stock market since 1964 , asserts Alan Newman, editor of CrossCurrents.
We believe the current mania has taken on the same kind of manic behavior as the “Nifty Fifty” groupthink mindset that allowed some stocks should be bought and never sold. It was assumed they would only go up forever. They were even called one direction stocks.
In 1973, the top ten stocks were down 38.2% and collapsed by another 67% in 1974. Thus, as valuations were cut nearly in half for the S&P 500, the stocks most in vogue lost 80%.
The only difference today is that the exact same mindset exists for a much smaller group of stocks — Amazon (AMZN), Apple (AAPL), Facebook (FB), Google (GOOG), Microsoft (MSFT) and Netflix (NFLX).
We expect the mania for these issues to unwind dramatically later this year. Perhaps not an exact replay of 1973-1974 but a decline of 40%-50% would not be an unreasonable expectation.
We see a monstrous oversold condition countered by what is now an equally enormous overbought condition. We do not see this as the start of a new bull market. A bear market of only one month duration to culminate a mania is a ridiculous fantasy
The Dow Industrials never did make it back to the regression line, so we believe this target is still very much on the table. The line currently stands at 17,166, 36.7% below recent levels. Of course, this would only satisfy one of our projections. We see no reason to change our view.
Although gold is still running into the proverbial brick wall around $1750 per ounce, bullion priced in Yen, Euros and British Pounds continues to forge ahead to new all time highs.
Our favorite gold stock for years has been Newmont Corp. (NEM). Given what we perceive to be massive uncertainties for the remainder of the year and possibly beyond, we expect further progress towards a new high for bullion later in the year.
