Monday, November 1, 2010

Ron Meisels, Toronto Money Show 2010

This is the last session I went to and it is the end of my articles on the Money Show. This talk by Ron Meisels was called “Phases and Cycles, Market Outlook 2010”. He has an investment letter that is available at his site Investment Letter. Meisels was just hired in June of 2010 by Caldwell as a consultant. See Caldwell. Meisels opened with saying that technical analysis is all about cycles, sentiment, price patterns and fear, greed and hope. He says the market creates supply and demand. Supply and demand creates cycles and cycles create patterns.

Meisels says that our stock market is a series of 40 year secular cycles. The first part is the secular bull market and the last part is a secular bear market. A cycle is consists of a cyclical bull market followed by a cyclical bear market. The secular bull part consists of cycles where the cyclical bear market does not go to take us back to the beginning of the cyclical bull market. That is, you get ever higher cyclical bull markets highs and ever higher cyclical bear market lows.

The last two cycles that form the top of the secular cycles you get two cycles where the cyclical bear markets pull the stock market back to the beginning of (or even lower) than the beginning of the initial cyclical bull markets. Usually one of last cyclical bear markets is much bigger than the other one. The problem with the second cyclical bear market is that it brings bankruptcies with it. This is similar to but not exactly that same as what Meisers published in 2008 at phases and cycles 2008 paper. See the 40 year cycle or Meisels cycle 1894 – 2014 picture. The new cycle patterns seem to eliminate the first two cycles and the last cycle of this picture.

Meisers says that the Canadian market usually does better than the American market because we have so many resource stocks. In the above picture, the dotted line is for resource rich markets like our Canadian market. However, the paper of 2008 was produced 2 years ago and people change their minds about how things work all the time. However, if you send an email to and say you want the hand out for Ron Meisels speech about Phases & Cycles at Money Show in Toronto on Friday, October 22nd, 2010, you will be sent one.

The market is up 75% since the last cyclical bull market started. Is this bull market over with? He gave 5 reasons why it is not. The first reason is that this bull has only lasted 14 months. The shortest bull cyclical market was 7 months, and the longest was 113 months. The average cyclical bull market lasts 45 months. He did not think it has run its course. The second reason is that the 40 day moving average (MA) is rising and it has just crossed the 200 day or 40 week MA. His third reason is that the there is a 2:1 ratio of the advances versus the declines on a 10 day average basis. (That is there are more stocks going up (advances) than going down (declines).) This has happened twice. It happened in 2009 and it just happened again.

His fourth reason to think that the bull market will last is that both the Dow Jones Industrials and the Dow Jones Transports indexes are rising. The last one is where we are emotionally in this market. We are somewhere between thinking that this is another fake bear market rally and being hesitate about whether we should be buying stock or not. There has also bee a rise in the volume of trading on the stock markets from a low volume. This is usual for the start of a bull market. (Sometimes a very high volume of buying is at the top of the market.)

We have had a bull rally from the March 2009 lows. In July 2010, the market was over brought and we had a correction. However, July 2010 the market has been rising. In the intermediate term, we might have some weakness or a correction at the end of October or first of November, but we are in a secular bull market. He thinks that we are in the same sort of period as we were in 1982 and that this secular bull market will last for about 20 years.

So, what stocks does Meisers suggest we buy? His suggestions are Shaw Communication (TSX-SJR.A); Veterra Inc (TSX-VT); Wi-Lan Inc (TSX-Win); Bristol Myers Squibb (NYSE-BMY); Home Depot (NYSE-HD); Arch Coal (NYSE-ACI); Denbury Resources (NYSE-DNR); USEC Inc (NYSE-USU); Mag Silver Corp (TSX-MAG); Mega Uranium (TSX-MGA); and Vista Gold (TSX-VGZ).

Meisers feels that a price breakout is due for both Denbury Resources and USEC Inc. The last thing he said was that people are often reluctant to buy a stock when it hits a 52 week high. However, he says, that might be the best time to buy a stock.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.

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