Summary
The time is approaching for a major stock-market update. In the meantime...
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There are some major equity-market themes that have been and remain in play. A reaffirmation:
(1) I remain steadfastly in the "secular bear" camp. The highs put in during the first quarter of 2000 are likely to hold for a long time to come. Years, yet, is a strong possibility.
(2) Secular bear markets will contain some very powerful cyclical counter-trend rallies. A wonderful example is the cyclical bull commencing off the market's complex bottom created during the July-October 2002 period.
(3) Nevertheless, that cyclical bull episode is more than likely over. It probably ended with a complex topping pattern that concluded during early March. If so, a final confirmation could be imminent.
(4) Which is a nice segue into another theme developing over the last several weeks, to wit: My growing feeling that "go away in May" would be a highly sensible idea this year. I have a hunch that, on balance, the summer of 2005 is going to get pretty ugly.
(5) Ugly enough to fulfill a forecast of several months ago that during 2005, the bellwether measures would experience double-digit declines from their respective 12/31/04 closing prices.
Some Levels of Interest
* As of last Friday (5/27), my seven-measure tracking group showed an average year-to-date decline of 2.7% (median decline of 2.2%).
* All seven proxies were in the red for the year, with losses running in a range of 0.9% for the NYSE Composite, to 5.3% for the Russell 2000.
* It has yet to be confirmed that yesterday marked a transition to the downside. However, the tracking group's average decline came in at 0.4%.
* As of last Friday, the DJIA, the S&P 500 and the NASDAQ 100 stood 10.7%, 22.0% and 67%, respectively, below their 2000 closing highs.
* An overall 10% decline sometime this year from 12/31/04 closing levels sounds reasonably formidable -- particularly so, considering where many of the important market proxies stood last week. It will be no mean task to be sure. On the other hand, were June and July of 2005 to behave at all like the same months of 2002, the 10% bogey is eminently doable.
As of last Friday's closes, here is how the minus 10% math worked out. As the table below indicates, it would have required an average 7.5% decline from last week's closing levels to do the trick. On an individual basis, the necessary declines ran in a range of 5.0% for the Russell 2000, to 9.2% for the NYSE Composite.
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SELECTED STOCK-MARKET MEASURES -- DECLINES REQUIRED
FROM RESPECTIVE CLOSES ON 05/27/05 TO PRODUCE
10% DECLINES FROM RESPECTIVE CLOSES ON 12/31/04
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12/31/04 A 2005
Close Minus 10%
05/27 12/31 Minus 10% Close
2005 2004 ------------- Versus
Measure Close Close Points Price 05/27
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Russell 2000 617 652 66 586 -5.0%
NASDAQ 100 1550 1621 163 1458 -5.9%
Value Line (G) 388 404 41 363 -6.4%
DJIA 10543 10783 1079 9704 -8.0%
Wilshire 5000 11840 11971 1198 10773 -9.0%
S&P 500 1199 1212 122 1090 -9.1%
NYSE Composite 7185 7250 725 6525 -9.2%
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Average -7.5%
Median -8.0%
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