b) But not until the bottom is in place and successfully retested in October, to bring the rest of the buyers in, and
c) Only temporarily, until the hazards of Year 4 have been navigated....an investment in the summer or autumn of 2004 would be the most auspicious in terms of decennial cycles, if not presidential cycles.
If a Republican wins the presidency, market rallies in the past (Growth Fund Guide reported years ago) have tended to be about six weeks max, until the market realized that the new GOP president would want to take his medicine early in his term (like Reagan in 1981). Democratic presidents led to longer rallies, on the order of six months or so, before the presidential cycle's upleg played itself out.
As to the decennial cycles, in the 1960's bull market, we had a notch correction after JFK made his famous remark about businessmen, which was occasioned by the steelmakers' response to his tariff relief they'd asked for. (Instead of attempting to win back market share, they just reached for the nearby money and raised prices -- outing themselves as liars and, effectively, swindlers on a national-market scale who'd just sucker-punched a president of the United States.) The market swooned, then the rally resumed with a sharp uptick and went on its merry way.
In the 1970's, there was a series of rallies and selloffs after the 1969 superbull top until the market faltered in 1973 and began to fall, and kept falling, into the 1974 blowoff. Investors' Intelligence reminisced a few days ago that, except for the 15% shot the market took in August, 1974, it was more a meatgrinder selloff, the classic grinding bear (like 1931/2) that killed everyone a yard at a time -- keeping them in, and maximizing the damage by killing them slowly.
In the 1980's, a round-trip early rally in 1981 fell into the blowoff 1982 triple-bottom low. Then the market had its steep 1982/3 upleg for nine months and then wandered around or declined slightly for a year, as the early (small, techy) leaders gave back some of their gains, from the summer of 1983 until August 1984. Then the market finally woke up again and rotated leadership, sharply rallying twice (I still think of them as "stairstep rallies", since it was impossible to react fast enough to catch them on the way up) in August and November 1984, before the mega-bull of 1985 took off.
In 1994 the whole year was punk and punished people who got in in 1993; and prognosticators by and large didn't see the 1995 rally coming. Fed watchers got caught looking as the fuel for the rally came from Japan and Europe, the liquidity seeping under the door, as it were, rather than through the Fed window. It was very stealthy and succeeded in keeping a lot of people out after the punkishness of the previous year had convinced people (including me) that the superbull top must finally have arrived.
Go back and look at the old curves, sum them if you can do it mathematically or just look at them and sum them mentally, and see where we fit. I think I.I.'s forecast based on their interpretation of insider activity (statistically corrected for the normal excess of selling over purchases, because of compensation schemes) is a credible road map into 2003, and that it looks ugly. Their call, that we're going to get more of a replay of the 1970's than the 1990's, is correct. Technically, a washout correction of the bull back to 1982 would be the most desirable -- that would imply Dow ~6000 at some point -- even though it would be really uncomfortable for people. And despite the fact that "one-decision"/"buy-and-hold" players (Granville called them "bagholders") didn't make any money between 1969 and 1983, lots of other people made money in the 70's timing the market. Mark Hulbert's survey results from the 80's that I looked at closely 10 years ago, however, suggest that playing a two-legged strategy using hedges and shorts doesn't work, that bonds or cash are much safer and pay nearly as well as the best one could hope for playing the short side. I've almost learned that lesson myself, but will be severely tempted to try the Rydex bear-market (Arktos and Ursa) funds next January -- it may be a hell of a bear ride.
The key, though, will be to play, and then sell, this coming November rally. Remember that at the end of the good upleg in 1982, people hurried to the sell window immediately after the New Year, and the Dow rolled off on a mathematical-looking curve in January and February. But that was an initial bull-market correction in 1983/4, and this is the correction of a superbull. As Investors' Intelligence keeps pointing out, there is a lot more optimism around now than there was in the like period in the 1970's; what will it take to cure those bad sentiment numbers? I don't want to be caught dead long the market when that correction is administered.