THE LONG VIEW

By Carl Swenlin at Decision Point

Over the years I have been told that, on average, from trough to trough the cyclical bull/bear cycle lasts about four years — two-and-a-half years for the bull, and one-and-a-half years for the bear. Looking at the monthly bar chart of the last 22 years, it is hard to see anything that looks the least bit like an average market cycle.

The 1994 Stealth Bear Market lasted one year and was so named because there was no price decline. At the very most it was a place holder and was deemed by some to be a bear market because of the huge correction of breadth indicators that too place.

The 1995-1998 Bull Market lasted three-and-a-half years and was followed by the 1998 Bear Market, a decline of 19% that lasted three months. At least the bull/bear cycle was nearly 4 years long.

The 1998-2000 Bull Market lasted almost two years, and was followed�the 2000-2002 Bear Market, which lasted about two years. The 2002-2007 Bull Market lasted five years, a full year longer than the average bull/bear cycle.

So what is the outlook for the current bull market.

At present we are about 22 months into the current bull market. There are similarities between the first year of this bull market and the one that preceded it — specifically the steepness of the rise and the distance traveled. And the current bull has climbed at a steeper angle and traveled more distance.

While anything is possible, it doesn’t seem reasonable that the current bull market is over. There has been a strong upward thrust, a substantial correction, and this week we made new bull market highs. A long-term rising trend line has been established. If that line remains intact, it is possible that the S&P 500 could reach the top of the long-term trading range at about 1550 in the next eight to twelve months.

On the negative side, the angle of the current rising trend line seems a bit steep, and a sideways consolidation would be a good way to correct this and to add longevity to the bull market.

BOTTOM LINE: In the last 22 years the market has not been noted for turning out textbook examples of bull or bear markets, so we probably shouldn’t get too hung up on the current bull market following a script that causes it to end in eight months. On the other hand, there is nothing on this chart that would cause me to believe that this bull is going to end anytime soon.

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