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Atlanta Money Manager, Financial Advisor, Financial Planner

2009: Evidence of New Cyclical Bull Markets

Our most recent 2010 comments and research can be found on Short Takes, which is updated regularly and may be worth a bookmark.

At CCM, we do not believe in making investment decisions based exclusively on financial market forecasting. We instead look for fundamental and technical alignment to support and confirm forecasts. The transition from a bear market to a bull market takes time. Long-term investors can migrate from bear market allocations to bull market allocations as evidence of a primary trend change unfolds over several months.

In mid-April of 2009, the NASDAQ made an important new high, which may have signaled the first major step in the transition from a bear market to a bull market. The research below covers numerous observable events which point to the possibility of a new cyclical bull market taking shape in 2009. Cyclical bull markets can last from a few months to a few years, which is in contrast to a secular bull market which can last for 20 years or more. We do not believe all the elements are in place for a secular bull market, but we must respect that cyclical bull markets can last continue for years. For example, many believe the 2003-2007 bull market was of the cyclical variety. Cyclical or secular, the market went up for four years in the last bull market, which presented an opportunity for investors. Based on studies of post recession periods and periods after the S&P 500's 200-day moving average turns up, it is reasonable to surmise stocks could rally into the early spring of 2010.

Corrections To Be Expected

A cyclical bull market does not mean the coming months will be easy for investors. The market never makes anything easy for anyone. Significant corrections coupled with periods of uneasiness and fear are to be expected in any bull market, secular or cyclical. With a recent successful retest of lows in the S&P 500 and many markets well above their 200-day moving averages, we can afford to give our investments a little more rope during the inevitable corrections in asset prices. As time goes on, stop-loss orders and risk management techniques should be able to take on a diminished role as we will err on the side of remaining invested into early 2010.

If conditions deteriorate and the markets migrate back toward a bearish stance, we will be willing to accept the possibility that the current bear has further to run. However, bullish evidence is not in short supply as we enter the second half of 2009. We will continue to monitor the markets and invest based on the observable evidence at hand. The observable evidence at hand remains bullish.

Focus Remains on Money Supply Expansion, Asia, and Commodities

Since we have economic data and technical evidence in hand that support further gains in asset prices, for the balance of 2009 and for a portion of 2010, we will focus on the three themes below and place a reduced empasis on the two themes that follow.

Primary Drivers Next 10-12 Months

  • Expansion of the money supply / fiat currency concerns / inflation
  • Commodities, clean energy, and water
  • Economic shift from United States to Asia

Secondary Drivers Next 10-12 Months

  • Infrastructure & government programs (slow implementation of some programs)
  • Baby boomers' transition from consumers to savers / consumer deleveraging (still important long-term)

Research Supporting New Cyclical Bull Markets

  • May take a few moments Asset Class Outlook - Download PDF Version

  • New Bullish Signals - July 2009

  • Bullish Trends and Significant Corrections - June 2009

  • New Bull Markets - June 2009

  • NASDAQ's Move Important - Retest Still Likely - April 2009

  • Reflation: Deja Vu All Over Again? - March 2009

    These comments and research provided via the links above, taken from portions of research provided to CCM clients, may not pertain to or be appropriate for many investors based on their risk tolerance and situation. They are presented for educational purposes only.

    Chris Ciovacco
    Ciovacco Capital Management

    Atlanta Independent Money Management Atlanta

    Chris Ciovacco is the Chief Investment Officer for Ciovacco Capital Management, LLC. More on the web at www.ciovaccocapital.com

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    All material presented herein is believed to be reliable but we cannot attest to its accuracy. Investment recommendations may change and readers are urged to check with their investment counselors and tax advisors before making any investment decisions. Opinions expressed in these reports may change without prior notice. This memorandum is based on information available to the public. No representation is made that it is accurate or complete. This memorandum is not an offer to buy or sell or a solicitation of an offer to buy or sell the securities mentioned. The investments discussed or recommended in this report may be unsuitable for investors depending on their specific investment objectives and financial position. Past performance is not necessarily a guide to future performance. The price or value of the investments to which this report relates, either directly or indirectly, may fall or rise against the interest of investors. All prices and yields contained in this report are subject to change without notice. This information is based on hypothetical assumptions and is intended for illustrative purposes only. THERE ARE NO WARRANTIES, EXPRESSED OR IMPLIED, AS TO ACCURACY, COMPLETENESS, OR RESULTS OBTAINED FROM ANY INFORMATION CONTAINED IN THIS ARTICLE. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.

    TOPIC: 2009 Cyclical Bull Market May Have Started In March of 2009