# Calling Market Bottom



## lost in space (Aug 31, 2015)

So loads of comments here about selling off just before the market corrected, even my brother sold off everything he had. More good timing he was planning of moving from stocks to ETFs. So the question it looks like the market has bottomed out and is rallying back up. 

So question for those of you who sold before the correction are you buying now or is this just a dead cat bounce?


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## james4beach (Nov 15, 2012)

I am not buying. Market bottoms don't occur when the Shiller PE is 25 and there's record margin debt usage. Bottoms also don't occur when people are so uniformly bullish and optimistic about stocks as they are right now.


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## lost in space (Aug 31, 2015)

james4beach said:


> I am not buying. Market bottoms don't occur when the Shiller PE is 25 and there's record margin debt usage. Bottoms also don't occur when people are so uniformly bullish and optimistic about stocks as they are right now.


Interesting hadn't heard of the Shiller PE. That was one of the reasons why I stopped trading, had no real tools to measure market tops or bottoms. Do you know of an equivalent of a Canadian one?


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## dogcom (May 23, 2009)

There are things like hammers and such people use when the market is really going bad and panic is the name of the game. This panic is usually measured by the VIX and when it hits 50 or higher we are panicking. The VIX alone measuring this high is usually enough to call a bottom. However this doesn't mean the bottom it is usually one of the bottoms in a bear market. A true bottom usually sees the golden cross and such signals occur along with other signals like the transports and industrials confirming and so on. I should add we are not in a bear market yet so this can still just have been a correction we witnessed in August but at the same time conditions a right for stocks to fall much more.

We also have to remember we are in hyper manipulated markets so anything crazy is possible.


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## andrewf (Mar 1, 2010)

VIX usually spikes at the initial panick. In 2008, the VIX peak was in October, the market bottom was in March. The recent VIX high is pretty tame compared to 2008, as well.


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## godblsmnymkr (Jul 15, 2015)

james4beach said:


> I am not buying. Market bottoms don't occur when the Shiller PE is 25 and there's record margin debt usage. Bottoms also don't occur when people are so uniformly bullish and optimistic about stocks as they are right now.


its debatable whether shiller PE is a valid metric. http://www.aaii.com/journal/article/a-cautionary-note-about-robert-shillers-cape.touch it would have kept you out of the market by saying it was over valued many times in this bull market. 

average bottom takes 27 trading days. interesting read http://jlfmi.tumblr.com/post/128314766925/what-happens-after-a-crash

also from your questions i dont think timing the market is a good idea. i also dont think its a bad idea that your brother sold everything he had it just depends when he did it =)


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## GoldStone (Mar 6, 2011)

I am calling the bottom in signal to noise ratio on CMF. It reached the zero boundary.


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## CPA Candidate (Dec 15, 2013)

james4beach said:


> Bottoms also don't occur when people are so uniformly bullish and optimistic about stocks as they are right now.


Do you live on the same planet as the rest of us? The TSX has gone nowhere in two years. Take out Valeant, and it's down for sure.

I've owned some stocks from 2013 that are the same price now with 30-50% higher earnings and 5-10% bigger dividends. Valuations have collapsed. Half my portfolio has a TTM P/E of 12 or less, some single digit.


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## lost in space (Aug 31, 2015)

GoldStone said:


> I am calling the bottom in signal to noise ratio on CMF. It reached the zero boundary.


So back to the original question, for those who sold when are you getting back in to the market


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## mrPPincer (Nov 21, 2011)

I'll be buying at the bottom :greedy_dollars:


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## lonewolf (Jun 12, 2012)

Right on cue excitement of buying a bottom. We are no where near a bottom


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## mrPPincer (Nov 21, 2011)

I know 

added.. I didn't say how much I'd be buying at the bottom 
on the day of the 2009 market bottom I added $800 iirc, right now I'm sitting on about $100K, that's how I know I'll be buying at the bottom


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## GoldStone (Mar 6, 2011)

"Don't try to buy at the bottom and sell at the top. It can't be done except by liars."

-- Bernard Baruch


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## Sampson (Apr 3, 2009)

lost in space said:


> So back to the original question, for those who sold when are you getting back in to the market


Who sold? There was one member who spoke of how their MF advisor had them sell out, I don't recall anyone else really timing well...


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## GoldStone (Mar 6, 2011)

lonewolf said:


> Right on cue excitement of buying a bottom. We are no where near a bottom


Me thinks you are the most excited poster on CMF right now 

never mind that you missed the entire bull run of the last 6 years.

215% up, 15% down, oh my god, it's the end of the world as we know it.


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## lonewolf (Jun 12, 2012)

GoldStone said:


> Me thinks you are the most excited poster on CMF right now
> 
> never mind that you missed the entire bull run of the last 6 years.
> 
> 215% up, 15% down, oh my god, it's the end of the world as we know it.


 Caught a good junk of the bull run went long @ a planetary stationary near an eclipse with in a day or 2 of the 09 bottom. Upper trend line of jaws of death tagged in Dec 2014 it was time to leave the party. Might put small long position on after the Oct crash for Santa bear Rally. Looking to scale into core long position around 1000 on the DJI & around the DJI 400 level.


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## humble_pie (Jun 7, 2009)

.

he'll be buying at the bottom when he buys
he'll be buying at the bottom when he buys
we'll be buying at the bottom
we'll be driving six white horses
we will kill the old red rooster
when he buys

thet blissed out green gingham gramma on the cello, she does look a bit likkered up. Meanwhile speechless there on the fiddle, him in the black feather het & the the navy denim, thet's her wannabe boyfriend, he so cute.

.


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## gibor365 (Apr 1, 2011)

> Looking to scale into core long position around 1000 on the DJI & around the DJI 400 level.


 is it a joke?!


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## OnlyMyOpinion (Sep 1, 2013)

humble_pie said:


> .
> he'll be buying at the bottom when he buys
> he'll be buying at the bottom when he buys
> we'll be buying at the bottom
> ...


Ok, listening to that was more painful than watching a market crash :uncomfortableness:


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## mrPPincer (Nov 21, 2011)

I enjoyed listening to it, but I might be a billy (not many hills around here) :blue:


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## sags (May 15, 2010)

Loved it..........thanks Humble.......

It reminded me of the time we were on our way to Florida driving down I-75 in Tennessee and my dad "discovered a shortcut" on the map that "would knock miles of the trip"

So we pulled off on the road and travelled along to a fork in the road with no sign. Then along a little further to another fork with no sign. And another and another.

We kept going as the dirt road started petering out and finally there was barely enough room to keep the wide Chrysler out of the ditch.

We ended up driving into someone's yard, replete with a few rusting out cars, an unpainted ramshackle wooden house, some chickens and a couple of kids running around barefoot.

He turned the car around and we did our best to retrace our steps and finally.............4 hours later arrived at the very same location where we had left I-75.

Good plan Dad................

I think of that occasionally, along with the lonely looking trailer home in a Montana pasture, abandoned homes in a small Saskatchewan village, when I am feeling a little deprived.

It reminds me that a lot of people are happy with a lot less, and they couldn't care one whit what central banks or stock markets are doing.

The look of pure joy at that woman's face as she sings............well, you just can't put a value on that.


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## godblsmnymkr (Jul 15, 2015)

http://www.pragcap.com/the-1998-playbook/

*That all sounds too familiar today. And here we are in year 3 or 4 of a rolling emerging market slowdown which now appears to be culminating in cratering emerging market stock markets and spillover into the developed world economies. Now, I personally find it hard to believe that a country that makes up just 5% of S&P revenues like China does, is going to derail the US economy, but I would be an idiot if I didn’t admit that I have no idea what’s really going on in the Chinese economy (and neither does anyone else to be honest). But common sense tells me that this isn’t a 2008 repeat. Rather, it’s much closer to a 1998 repeat where emerging market stocks got crushed and then whipped back while US stocks fell about 18% and then roared to much higher highs.*


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## GreatLaker (Mar 23, 2014)

sags said:


> He turned the car around and we did our best to retrace our steps and finally.............4 hours later arrived at the very same location where we had left I-75.


Good one Sags. Kinda like selling because the market seems frothy and waiting for a dip to buy back in. Months or years later the market falls and investors are buying back in at the same levels they sold at.
:stupid:


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## Pluto (Sep 12, 2013)

The volume on days the market goes up is too low to demonstrate conviction, so not sure bottom is in. But if you buy quality stocks at a good price, why does it matter?


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## gibor365 (Apr 1, 2011)

> But if you buy quality stocks at a good price, why does it matter?


 this is why I'm planning to add to my JNJ holdings...


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## humble_pie (Jun 7, 2009)

here's a low-cost arch-conservative play to take advantage of weak banks & weaker energy during whatever plateau, low or trough we might be passing through.

today i bought a few march 2018 LEAPs in XIU. This top-60 etf is heavy in energy & financials. The strike was $20, right on the money. 

i haven't decided yet whether i'll buy a bunch more plus sell 22 or 23 calls of march 2017 to turn the shebang into a diagonal spread.

or whether i'll consider my stash of cash at 3% in tangerine to be forming, together with the XIU Leaps, a homemade equity linked note, hillbilly style.

maybe i'll do both, yeehaw


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## GoldStone (Mar 6, 2011)

Pluto said:


> But if you buy quality stocks at a good price, why does it matter?


Why are you so rational? This is against the rules.


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## fatcat (Nov 11, 2009)

sags said:


> Loved it..........thanks Humble.......
> 
> It reminded me of the time we were on our way to Florida driving down I-75 in Tennessee and my dad "discovered a shortcut" on the map that "would knock miles of the trip"
> 
> So we pulled off on the road and travelled along to a fork in the road with no sign. Then along a little further to another fork with no sign. And another and another.


 gulp :cower:


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## humble_pie (Jun 7, 2009)

yep. who cares if we izz hi or lo. how about a good old-fashioned foot-stompin corn-shuckin moonshine fiddlin harvest party for labour day weekend.

can someone please bring on the Carolina chocolate drops. Best folk music you ever did hear. So far above folk they're in a class of their own. Ethnomusicology i think they call it.


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## mrPPincer (Nov 21, 2011)

Nice call.. never heard of them before, but here's what I found with a google search and am enjoying atm, not exactly foot-stomping yet, but very nice..
https://www.youtube.com/watch?v=-3XsHMOEQGc&list=RD-3XsHMOEQGc#t=0


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## Westerncanada (Nov 11, 2013)

lost in space said:


> So loads of comments here about selling off just before the market corrected, even my brother sold off everything he had. More good timing he was planning of moving from stocks to ETFs. So the question it looks like the market has bottomed out and is rallying back up.
> 
> So question for those of you who sold before the correction are you buying now or is this just a dead cat bounce?



I have sold off several positive equities in my holdings to build up a cash reserve.. obviously no one knows for sure when a dip or crash is coming but my plan is to let the O&G companies post more layoffs/budget/dividend cuts in Q3 this year and pickup the following at the levels:

XEG - $9 
CPG - $10-$12 
WCP - $9


All of this would be in my non-reg account with some in the little TFSA space i have left. 

In my RRSP i buy TD E-Series monthly regardless of market timing/price on a regular schedule.


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## lonewolf (Jun 12, 2012)

gibor said:


> is it a joke?!


 No joke

From the years 1966 - 1982 was a 4th wave. 

The 5 up from year 1982 most likely over ( wave 1 up was from the year 1982 to Aug 24th 1987 harmonic convergence, Wave 2 was the ABC decline into the 87 crash low, A wave declined into Rosh Hashanah solar eclipse, wave B rallied into Yum Kippur, Wave C crashed into double grand cross in heliocentric, Wave 3 rally from the wave 2 crash ended in the year 2000. 4 wave flat from the year 2000 to the year 2009 planetary station near an eclipse. Wave 5 on semi log scale formed a diagonal triangle.

After 5 up is complete the most likely path is to retrace back to the area of 4th wave support of the 5 up. Often the market will retrace to the 4th wave low esp if the market is going to trace out a 4th wave if it is a wave 2 lower retracement will often be seen.



Note
Going into Rosh Hashanah there is a solar eclipse like in 1987, If the market price pattern forms a 5er down into the eclipse then rallies into Yum Kippur the prophecy of action taken between Rosh Hasanah & Yum Kippur will effect you the following year might play out like it did in 1929 & 1987. A rally that retraces aprox .618 of the decline will be a gift to those that short keep an eye on Yum Kippur for a top in a wave 2 rally & or the last of the 4 blood moons of Sept 28th. There most likely was a reason in the past blood moons, Jubilee years & the month of Trishary were important to the ancients maybe it was just simply crash season ?


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## steve41 (Apr 18, 2009)

Mazel Tov!


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## GoldStone (Mar 6, 2011)

I am calling the top. Wolfie, you can retire now. You can't troll better than this.


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## Pluto (Sep 12, 2013)

GoldStone said:


> Why are you so rational? This is against the rules.


I should mention I am not buying yet. There is no reason to think the bottom is in and prices are not as good as they can be.


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## Pluto (Sep 12, 2013)

sags said:


> Loved it..........thanks Humble.......
> 
> It reminded me of the time we were on our way to Florida driving down I-75 in Tennessee and my dad "discovered a shortcut" on the map that "would knock miles of the trip"
> 
> ...


If this was a metaphor for an investing strategy what would the strategy be?


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## james4beach (Nov 15, 2012)

humble_pie can you explain more about your options strategy? So you bought XIU 2018 calls at-the-money? That's pretty far out! Is there a big premium on those that will time decay?

When it's so far out, and the premium is large, how do you evaluate the profitability of such a position? Thanks!


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## james4beach (Nov 15, 2012)

CPA Candidate said:


> Do you live on the same planet as the rest of us? The TSX has gone nowhere in two years.


_What?_ The TSX 60 (total return) in the last two years is +14%.

Since 2009, it's up +75%. The index is very close to its all time high right now. On your planet do they call that *a bottom?* You've got to be kidding me!

Let's look at two charts going back to 2000. First is the TSX 60. Is this closer to its lowest value or highest value?
http://stockcharts.com/h-sc/ui?s=XIU.TO&p=D&st=2000-01-01&en=(today)&id=p45770834892

For contrast, here's commodities. Is this closer to its lowest value or highest value?
http://stockcharts.com/h-sc/ui?s=$CRB&p=D&st=2000-01-01&en=(today)&id=p49117275495

This is a no brainer ... stocks are near their highs, and commodities are near their lows.


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## Oldroe (Sep 18, 2009)

A little bit of wisdom from a guy that bought in 2014 after missing the run of century. Go get those charts.


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## humble_pie (Jun 7, 2009)

james4beach said:


> humble_pie can you explain more about your options strategy? So you bought XIU 2018 calls at-the-money? That's pretty far out! Is there a big premium on those that will time decay?
> 
> When it's so far out, and the premium is large, how do you evaluate the profitability of such a position? Thanks!




XIU was trading in the 20.00-20.10 range, i bought 10 calls expiring march 2018 for 2.06, ie $2 as TV or theoretical value.

i'd wanted to go as far out in time as possible, since we don't know the future. We don't know where we are in the down cycle & some experts are glooming that, this time, no recovery will be possible for many years, although historically recovery from bear troughs has tended to be sharp.

james as you know, there've been several threads on how to build your own equity-linked GIC. This can only be done IMHO with LEAPs options, as owning a small amount of a core equity ETF itself will never provide the leverage an investor needs. Nor can he increase the proportion of ETF in such a combo, because at today's interest rates he needs more than 90% of this DIY Hillbilly version to remain in GIC if he wants the structure to mature at par a few years hence (it's supposed to be a principal-protected structure, remember?)

the Hillbilly version is also so much more flexible than the versions peddled by the banks, which are always pegged to a maturity date. Hillbilly's equity portion - the call options - can be sold anytime to lock in good gains during the life of the structure. Can't do that with a bank product.

a $2 premium for an option fixing XIU at $20 for 31 months is normal, IV & delta are normal. Options in XIU are normally inexpensive as the underlying is such a plodder.

if i were now to sell something like mar17 23 calls against the long calls, my cost would drop to 1.80, with a potential rise capped around $3. 

buying long-term call options is a conservative strategy as the losses are limited. Maximum loss in Hillbilly right now is only 2 pennies per share of underlying XIU. As of now i haven't put on any offsetting short call position, so the potential gain in Hillbilly is unlimited. I might choose to keep Hillbilly like that.

as for picking XIU, this is a no-brainer. The canadian market is top-heavy in energy & finance, so every top 60 or top 30 canadian fund has to be weighted in those 2 sectors. However, XIU is the only fund where the institutions play in volume. An option trader has no choice but to go to XIU's liquid markets.

lastly, timing. The energy sector is already destroyed. Now that the banks are weakening, i thought to take an initial step. I'll probably buy more of these calls since i for one don't believe the bottom is in yet. Meanwhile, long-term LEAPs calls in XIU are lightyears safer than buying any individual energy company, no matter how alluring it may look.

i don't practice exactly what i preach, though. In recent months i've also bought a fair amount of risky stuff. A few thousand shares of bankers' pete plus sell short calls, 1000 precision drilling plus sell calls, 2000 shares in crescent point plus an option collar that will get me out at $26 no matter what, 400 shares concordia health plus sell calls, i believe i even crammed in an extra lot or 2 of roybank.

right now i'm thinking to put on a mildly bullish strategy in california chip maker ambarella & even an insanely risky bullish strategy in trican well services, on the assumption that selling their kazakhstan property will likely be the key to TCW avoiding bankruptcy.


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## james4beach (Nov 15, 2012)

Thanks for the details. I have also used XIU calls to construct "stock-index GICs" but I did this in the past when interest rates were much higher. I had not tried the calculations more recently.

I think the 2018 XIU calls are not a bad idea; decent probability of success. I have a very similar trade in mind, but honestly I expect XIU to drop further in the short term.


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## lonewolf (Jun 12, 2012)

It will be interesting to see if options to play the stock market will be around several years from now. A scape goat will be needed options might get viewed as a weapon of mass destruction for the market & simply be banned until the mood of the masses shifts to risk on.


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## lost in space (Aug 31, 2015)

Sampson said:


> Who sold? There was one member who spoke of how their MF advisor had them sell out, I don't recall anyone else really timing well...


I had seen a few comments about people sitting on a large amounts of cash. Unfortunately for me I sold my 30 bond and bought into the market as it was peaking, so I'm down 15% on Canada and about 7% on the US and Vanguard Ex North America. I'm not too upset as the dividends are being re-invested. My bond fund is down 3% if/when it comes back I might sell it and put it into XIE, I love the yield and the volatility doesn't bother me.

As an aside it was a good experience seeing how the markets can crater, when things are good it's temping to sell bonds and buy more stocks, fine if you still wealth building but can hurt if you're about to retire (I have about 10 years)


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## lost in space (Aug 31, 2015)

*The Dead Cat Bounce*

Been watching my TSX ETF (XEI) and noticed that it bottomed out at around a 16% loss I was thinking of buying more. Then when it bounced backed (to about a 10% loss) I figured I missed market bottom. Well just logged into my TD Waterhouse account and it's back down again. so I guess it was a dead cat bounce.

BTW I'm referring to my account when talking about the percentages not to the ETF returns


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## AltaRed (Jun 8, 2009)

A month or two of recovery is NOT a sign of a market bottom, especially when there are no fundamentals to drive it higher. 

A year ago, I thought a market bottom might have been reached by 4Q15 but that was on the premise of about a 10% decline in NA oil production over the course of 2015. That has not happened. OPEC production is up, Russia is at an all time record and Canadian production is still up year over year. US production has only fallen off about 5-6%. 

Absent a change in direction by Saudi, the market bottom may not occur until at least Spring of 2016 and then we might have the headwinds of Iran production coming to market to suppress any recovery. 1Q16 writedowns could be rampant in the oil and mining sectors as companies clean up their year end books. It could be a very long 2016.

Added: Canadian production will not fall off much in 2016/2017. From http://navigator.oilsandsreview.com/listing the projects (other than Shell Peace River) listed as Construction will come on stream. CNRL has 125kbpd to come on stream as does Suncor with another 160kbpd and maybe another 100kbpd of in situ/SAGD. That will likely be more than enough to offset any declines.


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## lonewolf (Jun 12, 2012)

There is going to be a lot of stinky fingers out there picking bottoms this late in the cycle. Buying every little market dip is going to keep on working until it does not work anymore


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