Martin Pring is a well known technician who recently started writing for the Street.com.

I particularly found this chart of his from a recent  RM column instructive:

click for larger chart

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Pring describes this as follows:

"Once in a generation or so, you can spot a chart that has extremely important long-term consequences. The first chart below is such an animal.

It shows U.S. stock prices deflated by commodity prices back to 1800. The stock part of the equation consists of the S&P Composite since 1926 spliced with several other indices back through the ages. The commodity series is the CRB Spot Raw Industrial since 1955, which has been spliced into other historical commodity series.

The momentum indicator in the lower panel is a 120-month rate of change. It is a little-known fact that there is a close relationship between momentum and sentiment. Thus, high readings in this indicator correspond to previous stock market bubbles. The theory is that when the oscillator peaks from a high level, it tells us that the stock market bubble has burst and that the psychological pendulum has begun to shift in the opposite direction. This then needs to be confirmed by a trend reversal in the equity series."

Pring has offered up a number of free resources on his site (Pring.com)

Check out:

Return of the Bear (pdf)

and

Return of the Bear, a 30-minute video on technical signals and market history.

Part 1

Part 2

Part 3

I found it quite informative.

>


Source:

S&P 500 Teeters on Wedge
By Martin Pring
RealMoney.com, 6/19/2006 1:04 PM EDT
http://www.thestreet.com/p/_rms/rmoney/technicalanalysis/10292480.html

Category: Technical Analysis

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

19 Responses to “Martin Pring: Return of the Bear”

  1. MeanGene says:

    I have to agree that we’re now in a bear market for stocks. Both the technical indicators and sentiment support this view. The problem is determining when the bear is ready to hibernate again. I would suggest we rely on a proven contrary indicator. Don’t buy stocks until Kudlow finally capitulates and admits there may be problems with the US economy.

  2. jkw says:

    I think you can get a better trendline for the 1950s-1960s by drawing it from about 1948-1968. It is then steeper and covers the stock market secular bull period better.

    There is also a trendline connecting the lows going back to 1920. We need a drop of at least 50% to hit it again.

    This is another chart that makes the 90s look very unusual. In previous secular bulls, the line drops back to the trendline every couple of years and doesn’t go way up off the trendline. But 1995-2000 the stock market just kept going up without any corrections. Does anyoone have an explanation? Was it 401s and IRAs providing constant buyers?

  3. ~ Nona says:

    Can someone offer me some thoughts/insights on this comment: that bull markets in equities coincide with bear markets in commodities — and vice-versa.

    Thanks!

  4. sell_the_ten_year says:

    Those video links are broken, here are the good links:

    Part 1

    Part 2

    Part 3

  5. chris says:

    I have a question from a novice… Why does the market rally on a hint of a fed pause because the economy is slowing ? Why are Oil and Gold up today and the dollar is falling. Is not all of this bad for the economy and inflation ?

    Chris

  6. VJ says:

    « “The theory is that when the oscillator peaks from a high level, it tells us that the stock market bubble has burst and that the psychological pendulum has begun to shift in the opposite direction.” »

    During his May 12th appearance on the ‘Nightly Business Report’, Douglas Jimerson (editor and publisher of ‘National Trendlines’) observed:

    We’ve got the discount rate reaching 6 percent for the eighth time in history of the Federal Reserve and each time they have reached 6 percent or higher, we’ve had a major top in the market.

    http://www.pbs.org/nbr/site/onair/transcripts/060512d/
    .

  7. ~ Nona says:

    Thanks for giving us the good links, sell_the_ten_year. This novice appreciated the Pring lessons.

  8. VJ says:

    ‘MeanGene’ posted:

    « “I would suggest we rely on a proven contrary indicator. Don’t buy stocks until Kudlow finally capitulates and admits there may be problems with the US economy.” »

    Quite.

    I’ve always wanted to open an investment fund, with no analysis, no staff, no computers, no market tickers or screens. Just a couple of TVs tuned to whatever appearance Kudlow makes. Then you invest in the exact opposite direction. One could make millions.
    .

  9. drey says:

    thanks guys – you’ve given me a whole new (and finally, a legit) reason to watch Kudlow again.

    I thought I’d turned him off for good after the Ann Coulter love fest a couple weeks ago which about made me puke.

  10. BDG123 says:

    Barry, you might want to work on your English accent. While you are a very distinguished gentleman and an equire in your own right, Martin has that distinguished accent. That’s all you need to be the “whole package”.

    Martin’s charts are interesting and I have the utmost respect for him but to me it’s another “indicator” and everyone has to have their own to convice people to buy their schtik.

    There are very few independent variables and everyone is twisting the same numbers every which way to come up with something novel. But, the reality is they all say the same thing.

  11. Mark says:

    …..”you might want to work on your English accent”.

    That and “The Sweater”! Think of the possibilities!

  12. Jimcos says:

    What I find most fascinating is to look at the turns from the lows. Those are the times when the probabilities were best to make good long-term money. Buffett’s “fat pitch.” The returns from betting the ranch, loading up, and buying-and-holding from any of the three periods during the 20th century when that indicator went below zero have turned out to be way above expectations.

    They were also the times when sentiment was the crappiest, nobody wanted to own stocks, and dividend yields + projected nominal growth led to very good total returns.

    Somebody please send me an email when this thing goes negative. Everything between here and there is mainly the tide running out.

  13. Leisa says:

    Barry:

    I’m glad you posted this. I got a heads up e-mail from Lisa Pring–I have found Martin’s technical analysis work, in addition to John Murphy’s, very accessible and understandable. I immediately devoured his article as well as listened to his video commentary. When he speaks and guides me through this stuff it seems understandable. I still don’t get the rally yesterday. If the Fed stops because the economy is slowing, it seems a little counterintuitive for stocks. But hey, what do I know?

  14. Leisa says:

    Barry:

    I’m glad you posted this. I got a heads up e-mail from Lisa Pring–I have found Martin’s technical analysis work, in addition to John Murphy’s, very accessible and understandable. I immediately devoured his article as well as listened to his video commentary. When he speaks and guides me through this stuff it seems understandable. I still don’t get the rally yesterday. If the Fed stops because the economy is slowing, it seems a little counterintuitive for stocks. But hey, what do I know?

  15. Bob_in_MA says:

    “Thus, high readings in this indicator correspond to previous stock market bubbles…”

    um, from the arrows he’s drawn, are we to infer that the drop in the top graph ca. 1914 corresponds to the peak in the bottom graph in 1888? What he’s shown is both graphs have peaks and sometimes they seem to correspond to each other, give or take 25 years….

    Every time you point to some such nonsense it further clarifies why Warren Buffett managed to beat the market so resoundingly using so simple a strategy.

    You make a good argument when you confine yourself to statistics, but you continually undermine it by pointing to any graph of historical trends (no matter how contrived and convoluted) that seem to reinforce your view….

  16. VL says:

    These are the early warning signs of slow economic growth (or recession) and high inflation:

    The Chicago purchasing managers index fell to 56.5% in June from 61.5 in May. The prices paid index rose to 89.0% from 76.9% in May. This is the highest level since July 1988.

    The yield curve is inverted.

    After considering today’s facts, it is hard to disagree with Martin Pring’s technical analysis and predictions that we are going to see major bear markets in 2006.

  17. Jordan says:

    JKW-

    Look at money supply and charts of M3. You can see how much money Greenspan printed which helped “inflate” the markets.

    It’s whats going on today as well- which is why its so important to chart the markets against gold and commodities- like Pring did. Those that dont just assume we are in a bull market and things are great bc the Dow is near a high.

  18. Eric Tompson says:

    That’s very interesting. Do you think the bear will last a few months? years even? Hopefully it will, that’d be good for the economy. What with the flattening of the world (Freakonomics, by Levitt, and Dubner), we’ll have more reason to want a bear market.
    Good stuff, keep up the posting. I just started keeping a blog, check it out: New York Real Estate
    Let me know what you think.
    Eric

  19. artto says:

    Martin Pring Da Ding-A-Ling.