We have observed something in the Monthly structure of the current Bear Market that makes us doubt we are still in a Bear Market... If you have a look to the SPX MONTHLY chart below, you can see a comparison between the previous Bear Market (2001-2003) and the one we saw in 2008-2009.
Basically, observing the typical previous Bear Market structures, we can see that the cases in history where a Bear Market had a Bear Rally made of 5 Consecutive Higher Closes are rare.
5 Consecutive Higher Monthly Closes is in fact a typical Bull Market structure, or a Bull Market signature, if you want. Sure, July is not over yet, but the SPX must retrace below 919.32 to close this month down and it is not sure it will make it. Even so, it would still show 4 Consecutive Higher Monthly Closes and that is beyond the 'Bear Rally' typical behavior, although of course this may be an 'anomaly'.
Basically, observing the typical previous Bear Market structures, we can see that the cases in history where a Bear Market had a Bear Rally made of 5 Consecutive Higher Closes are rare.
5 Consecutive Higher Monthly Closes is in fact a typical Bull Market structure, or a Bull Market signature, if you want. Sure, July is not over yet, but the SPX must retrace below 919.32 to close this month down and it is not sure it will make it. Even so, it would still show 4 Consecutive Higher Monthly Closes and that is beyond the 'Bear Rally' typical behavior, although of course this may be an 'anomaly'.
[click on the image to enlarge it]Let's have a look at the 1929-1932 Bear Market on the DJI (below). Here as well there are no signs of Bear Rallies lasting more than 4 months.
[click on the image to enlarge it]The next Bear Market we are going to look at is the 1937-1942. Here there was an instance where the DJI actually made 5 Consecutive Higher Monthly Closes before turning south again.
Although one may question here if the Bear Market was still on when that happened since the DJI has been dicking around for a while with an upward bias since the bottom in 1938, so this Bear Market is debatable.
Although one may question here if the Bear Market was still on when that happened since the DJI has been dicking around for a while with an upward bias since the bottom in 1938, so this Bear Market is debatable.
[click on the image to enlarge it]Finally, the 70s period, someone calls it a Bear Market, but we don't really agree, it was more a FLAT period, with one year Bear Market and the next year a Bull Market, or, if you prefer, a lot of (Yearly) swings up and down. This below is a chart of the SPX Monthly for that period and as you can see during the Bearish years (e.g. 68-69 or 73-74) there were no signs of Bear Rallies with 5 Consecutive Higher Monthly Closes.
[click on the image to enlarge it]Conclusion: although so many are convinced that another downleg is imminent, looking at the previous significant Bear Market cases in history, we don't see it happening, and we actually see a Bull Market structure in place, especially if July closes up. However, a correction is very due and possible, in August or September.
But there are plenty of examples that are showing us that after this correction we may have more upside and not a re-test of the lows as claimed by the most part of TA chartists, fundamentalists and EWavers.
We believe charts and EW have no predictive power at all, and we rely purely on quant data for our trading or investing decisions. What we are showing you here, the study of the 5 Consecutive Higher Monthly Closes pattern in history, it's an example of these type of studies and in our opinion it offers a much better assessment of the probable next market direction if compared to traditional charting methods.
Posted by:
The RL Team
http://www.retracementlevels.com/
But there are plenty of examples that are showing us that after this correction we may have more upside and not a re-test of the lows as claimed by the most part of TA chartists, fundamentalists and EWavers.
We believe charts and EW have no predictive power at all, and we rely purely on quant data for our trading or investing decisions. What we are showing you here, the study of the 5 Consecutive Higher Monthly Closes pattern in history, it's an example of these type of studies and in our opinion it offers a much better assessment of the probable next market direction if compared to traditional charting methods.
Posted by:
The RL Team
http://www.retracementlevels.com/
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