Close, But No Cigar

Most U.S. families have most of their net worth in two asset classes, their homes and their common stocks. At this point, the prices of homes have declined 6-7% from their peaks on a nationwide basis, an event unprecedented since the Depression of the 1930s. As I explained in a recent posting, there is probably more decline to come. The impact of this has already hurt consumer spending, as evidenced by the poor retail sales during the Christmas season. The stock market, reflecting the probable onset of a recession, has entered a bear market. I am 68 years old. During my adult life, I have never experienced a time when both asset classes were in decline nationwide. (We did have that circumstance in New York City during the 1973-74 period, which is the subject of a future posting.)
While the outlook is bleak, the stock market is a discounting mechanism and will bottom long before the clouds lift. Right now, as one wag quipped, "My 401K is rapidly becoming my 301K!"
In earlier postings, I said that the two necessary conditions for buying in a bear
market are 1)a level of at least 43 to 60 percent bears in Investor Intelligence's weekly survey of investment advisors, and 2) A 3/8 minimum retracement of the previous bull market, which is a Fibonacci number. Yesterday and today, the down market has retraced 3/8 of the bull move from 2002 to 2007. However, unfortunately, this week's percentage bears rose to only 31.5%, well below the threshold buy level of a minimum 43%. While it is safe to say that the percentage bears will rise next week, it probably won't yet reach 43%. So, at this juncture, I have not yet entered the equity market. Close, but no cigar!