Thursday Update

Yesterday’s market action should remove all doubt regarding the breadth and depth of this secular bear market. Unlike the 1987 market crash, an overvalued market adjusted with the assistance of program trading, and a narrow footprint, this bear market rests on a litany of deteriorating economic data and structural problems with the financial system.

The reversal of this bear market will not end anytime soon. That is not to say rallies will not occur. On the contrary, some of the sharpest rallies take place inside bear markets. Nevertheless, these movements are extreme and brief. I spotted the following chart on the Calculated Risk website who lifted it from dshort.com . It illustrates the four greatest bear markets over the last 80 years.

As you can see, we have exceeded the 2000-2002 bear market, the 1973-1974 bear market, and the first two legs of the 1929-1932 bear market. Rising unemployment and the curtailment of consumer spending near-term will prevent any immediate turnaround. The treasury market set records yesterday, with yields falling to levels not seen since the 1950’s on the 10 Year Note and the 30 Year Bond.

Thank GOD there are no economic reports coming out Friday. However, it is option expiration day. This market should be numb from excitement but with a shorten holiday trading week, next week, all bets are off. Strangely, the municipal bond market moved little, Thursday.