Technical analysts typically scoff on the notion {that a} 20% decline marks a bear market. Nevertheless, a glance again exhibits that additional losses are actually doable after a 20% decline. During the last 25 years, the final two bear markets began with declines in extra of 20% and the S&P 500 misplaced one other 12% after the 20% decline in mid March 2020. The crimson arrow-lines on the chart beneath present when the S&P 500 declines greater than 20% from a peak (day by day closing costs). The crimson shading exhibits the following declines. The S&P 500 fell one other 35% after the preliminary 20% decline into early 2001 and fell one other 45% after the preliminary 20% decline in 2008. The index fell one other 12% after the preliminary 20% decline throughout the covid crash after which rebounded.
The indicator window exhibits the Zigzag indicator (blue strains) with the S&P 500. This indicator exhibits swings which are better than 20%. Notice that there have been no 20% declines throughout three bull runs (2002 to 2007, 2009 to 2020 and March 2020 to December 2021). The S&P 500 additionally went and not using a 20% decline from November 1987 to March 2000. The blue callouts spotlight two bear market bounces of at the very least 20%. These two bounces occurred over a yr after the S&P 500 peaked and the index moved to new lows after these bounces. We already witnessed a 17% bear market rally from mid June to mid August. Judging from the final two bear markets, we will count on one other counter-trend bounce in some unspecified time in the future, however that is unlikely to be the bounce that ends the bear market.
No two bear markets are alike, however we will examine the final two bear markets to higher perceive the dynamics and set expectations going ahead. Particularly, there are the three phases of a bear market in accordance with Dow Concept. We’ve got additionally but to see a capitulation part that units up a monster advance that sometimes alerts an finish to the bear market. This week I dissected the 2 bear markets and utilized the teachings discovered to the present bear market. This detailed report and accompanying video can be found to subscribers of TrendInvestorPro. Click on right here for rapid entry.
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Arthur Hill, CMT, is the Chief Technical Strategist at TrendInvestorPro.com. Focusing predominantly on US equities and ETFs, his systematic method of figuring out pattern, discovering alerts inside the pattern, and setting key value ranges has made him an esteemed market technician. Arthur has written articles for quite a few monetary publications together with Barrons and Shares & Commodities Journal. Along with his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Enterprise Faculty at Metropolis College in London.
