I'm actually talking about the dollar bear market not stocks. Although at some point in the future I do expect stocks to enter the third stage of the secular bear market. As you can see from the second chart it appears we are now in the counter trend rally separating phase two from phase three of the secular bear market that began in March of 2000.
More importantly, at least to most commodity investors, it appears that the rally separating phase two of the secular bear market in the dollar has now run it's course and we appear to be entering the third and potentially the worst stage of the bear market. The 40 week moving average has again rolled over after a strong counter trend move for the last year and a half.
That' s not to say we won't see a 4th, 5th or even 6th stage of the bear market in the dollar and stocks for that matter. Usually humans can learn their lesson after losing three times in a row, but as we saw from Japan since 1990 it is entirely possible for governments to continually make the same mistake over and over. Japan has been in a secular bear market for 19 years.
The Fed is certainly on the same path as the one taken by Japan and so far with the same results. They have shown no ability to learn from their mistakes at all (I doubt Bernanke ever will learn). I suspect until we figure out that Bernanke is simply amplifying the flawed monetary policies started by Greenspan (and get him the hell out of office) we are doomed to ever larger financial catastrophes.
Albert Einstein noted that the definition of insanity is repeating the same action over and over expecting a different result. Until we oust these government officials that continually make the same mistakes over and over, we are going to be in for a lot more and probably much greater pain down the road.