Bear Markets Come And Go: Is A New One Coming...Or Is It Here?
Bear markets have a nasty habit of showing up every four years or so. Like unwanted relatives, they show up whether we want them to or not. They also have the nasty habit of taking away the punch bowl. And just when everybody is ready for a nice sip of that wonderful nectar. It doesn't seem fair and many folks wonder why. But listen up...fairness has nothing to do with the market. Bear markets have a very definite purpose. They clear up the excesses that have developed since the last bear market. It's kind of like when we indulge ourselves over a period of months and, lo and behold, we wake up one morning 20 pounds overweight. We have to go on a diet or buy a bunch of new clothes. Bear markets are the market's way of putting us on a diet. Most folks don't like them but they are a fact of life. So where do we stand now? The market has been a little wobbly recently and you hear some people starting to use the b word...as in bear. It makes you wonder what the market is telling us. Is the current weakness a normal correction or is the market telling us something else? Let's look at the evidence and see what we can make of it. Bear markets are definitely an ongoing reality and occur with some regularity. In fact, during the last 100 years there have been 19 bear markets. And, for our purposes, I am defining a bear market as a decline of 20% or more in the Dow Jones Industrials. Reviewing these 19 bear markets reveals some interesting facts... - The average time from the end of one bear market to the beginning of the next is 45.3 months.
- The average length of a bear market is 18.5 months.
- The average bear market results in a decline of 36%.
While this is valuable information, keep in mind that these are only averages. The individual bear markets varied widely in length of time and severity of decline.For instance, the longest bear markets lasted about three years. Specifically, they lasted 31, 34, and 37 months for the bear markets ending in 1942, 1932, and 1949 respectively. The shortest bear market lasted two months. This was the crash in 1987 when the Dow Jones Industrials plunged 36%. If you're wondering about the most severe bear market, you probably know the answer. Yep...it's the one associated with the start of the great depression...it ended in 1932. But this was only after it had sheared 89% off the value of the Dow. And the mildest bear market? The 3 month affair that ended in October, 1990 which took 21% off the Dow. Now...these are all interesting facts...but the question is...are they useful in analyzing the current market? And the answer is yes. But they are only part of the process. They're useful in that they gives us some parameters to consider. But they're only that...parameters. An actual determination of a bear market may take several months. However, with that in mind, here's what the averages tell us... - 45 months from the end of the last bear market in October, 2002 is July, 2006.
- If the market high of 11,670 on May 10 was a market high, an average decline of 36% will take the market down to around 7,470.
- If the market high was May, 2006, the average bear market length of 18 months will end in November, 2007.
Am I saying a bear market is here and ready to unfold according to these averages? Of course not. I'm not even saying the market top is in.This is only to point out certain facts related to bear markets in what seems to be turbulent economic times. That, plus the fact, that, historically speaking, this current bull market may be getting long in the tooth. However, one fact is perfectly clear. History tells us that a bear market will occur again. And, unfortunately, when they do occur, they strike fear into the hearts of investors. People who buy and hold are never ready for bear markets. Because of their buy and hold mentality, many investors try to ride them out. It's often not a pretty picture to sustain losses of 20%, 30%, or more in one's portfolio. Traders, however, are different. They don't fear bear markets. They view them as another opportunity to make money. In fact, money is often made quicker in bear markets. Markets generally go down faster than they go up. Yeah...traders don't fear bear markets...they enjoy making money faster. And they trade them like any market...with their trading system and money/risk management. So, is a bear market at hand? Nobody knows. However, there are signs to look for... - The market declines below its 200 day moving average.
- If it's not a steep decline initially, the market may trade around the 200 day moving average for a while.
- Declines are larger and last longer than previous corrections.
- Sharp rallies occur but they fail to make new highs.
- Look for a long term Elliott Wave count...5 waves up to the recent high.
- The market starts making new lows.
These are some of the things you will likely see once the market tops out and begins rolling over into a bear market.However, it may take a while before you know for sure. It's like everything else associated with the market. There are no certainties...only probabilities. But we know one thing is a near certainty. There will be another bear market. We just don't know when. However, it never hurts to look ahead. When a bear market starts, a lot of quick profits will be there for the taking.
Other Trading System Articles
Eternal Sunshine There is a current movie entitled “Eternal Sunshine of the Spotless Mind”. It is about a man who has had a painful love affair and will do anything to rid his mind of those pain thoughts of a former love. He sees an advertisement that offers just such a service. It seems his former lover has the exact thoughts and she goes through the same treat ...Daddy, Why Aren't We Rich? A Stock Trader's Story One Saturday morning, while he was sitting at his computer studying the market, David's 7 year old daughter came up, tugged at his shirt sleeve, and said, "Daddy, why aren't we rich?"He looked his child in the eye, and thought to himself, what a great question - why aren't we rich?As she stood there expectantly waiting for an answe ...Straight Talk -- Braces and Adults You're over 30, over 40, or over 50 even and have always wanted to have what you thought was a "pretty" smile. You've seen Pretty Woman several times and just can't get the image of Julia Roberts out of your mind when her Prince Charming climbs the fire escape to claim his Princess. Hollywood has a way with drama but Julia Roberts' smil ...The Stock Trading Plan 1. That discipline contributed more to their success than their trading philosophy itself. Remember that the key to any plan is how well it holds over time.2. There is no "sure thing", and there is no trading system that is 100% accurate. Your goal, as a trader, is to usethe tools available and try to develop an edge. Base your trades on ...Day Trading Forex Currency, Hype, Lies and TANSTAAFL Day trading Forex currency is all about making big money. Some investors have found it quite easy to make a large amount of money by day trading the Forex currency markets as they change hour by hour. But, you see that "some" in the previous sentence? What that means is that a lot of people don't make a dime and even lose a lot of money.U ...Stock Market for Dummy It is not easy to start trading on the stock market when you have no financial background at all. It shouldn’t be difficult to prosper, though, if you follow certain guidelines. Being organized and disciplined are two very important factors in this business. Don’t let all the information you gather confuse you. Make sure important decisions are ...Card Trading: Risks and Precautions You can trade your cards in two different ways: face to face, or by postal mail. The first type of trading is performed at tournaments, at schools, or at the local comic shop, and you arrange the trades by checking the other person's cards directly, holding them in your hands. Otherwise, cards are traded by mail when the parties can not meet bec ...Forex Trading: Calculating Profit and Loss in Foreign Currency Trading The foreign exchange market, or Forex market, is an around-the-clock cash market where the currencies of nations are bought and sold. Forex trading is always done in currency pairs. For example, you buy Euros, paying with U.S. Dollars, or you sell Canadian Dollars for Japanese Yen. The value of your Forex investment increases or decreases becaus ...Finding Hidden Profits In Your Business - 7 Strategies To Use Today If I walked into your business and spent an afternoon, I'm fairly confident I could find several little hidden profit centers, just waiting to be used. Let's talk about 7 strategies for finding hidden gold in your business.Strategy #1 Let someone else do the mopping and filingWhen you "save money" by doing $8/hour work ...Avoid The Paypal e-Cheque Scam - It Could Cost You! As the internet grows and more people begin to buy and sell, online payment facilties will accrue more members daily. The largest and currently one of the most popular is Paypal.Whilst Paypal make every effort to ensure its members safety, an entire fireproof system, can prove to be very difficult to produce. Everyday, there are members w ...What Is ISL Uranium Mining? In situ leach mining (ISL), also known as in-situ mining or solution mining, was first used as a means to extract low grades of uranium from ore in underground mines. First used in Wyoming in the 1950s, originally as a low production experiment at the Lucky June mine, it became a high-production, low cost method of fulfilling Atomic Energy Commi ...Simple, Effective Web Site Traffic Promotion Web site traffic promotion is central to the success of any online business. Without effective web site traffic promotion, an internet business will literally perish in a matter of no time just as a retail storefront would go out of business without customers walking through their doors. An internet business is as dependent on web ...Should You Use a Pareto Chart Unless you are familiar with manufacturing management principles, you probably have not heard of a pareto chart. It is a very effective tool managers use, to manage and effect outcomes in manufacturing environments. You're saying, How in the heck will this help my trading? Well it can, if you use it right.Another name for using pareto cha ...Futures Trading Software - Choosing a Package For Big Profit Potential! The growth of the Internet has seen traders look more at the use of futures trading software as a way to increase their profit potential.Today, many vendors are selling futures trading software packages that make 50% annualised gains a reality.While there are many good systems, there are also many that don’t perform. This article i ...A Quick Look at Currency Exchange Basics “The blunt truth about the politics of climate change is that no country will want to sacrifice its economy in order to meet this challenge, but all economies know that the only sensible long term way of developing is to do it on a sustainable basis.” -Tony BlairInvesting in an exchange currency market is a hot new trend that has become ...Hitler - Bush Hitler received a legacy from his Rothschild relations in Vienna where he and his father before him had studied. The De Medicis agent named St. Germain had established a solid schooling system for the occult in Vienna. You hear a great deal about Hitler and his weird sexual relations.There is so much about Hitler and his occult handlers w ...Your Guide to Learning a Forex Trading System There are a great number of people in America that are interested in investing in order to make a tidy profit. There are many ways to invest and many ways to make profits by investing. One method that has been gaining in popularity is that of the Forex trading system. If you are unsure of what this is, let me explain. Forex stands for foreig ...Good to Know Stock Trading Information Stock trading is a complex process that may be quite confusing and deceitful to a new trader. Therefore, if you plan to start investing your money in shares, you should first choose a stock trading strategy that is most suitable for yourself.The major difference between stock trading strategies is based on timeframe. It means that an acti ...12 Smart Trading Runescape Tip When you play RuneScape trading is everything! Here are twelve smart RuneScape tips to give you a significant edge over other RuneScape players.1.Never buy anything from a RuneScape shop (unless it’s stackable) because it will be more expensive than trading with a RuneScape friend.2.Don’t get scammed! There’s no worse feeling in th ...True Investment Road Maps If you don't know where you are going any road will get there. After you get there you might not like where you ended up. You must plan ahead for your trip.Do you know where you are going with your retirement portfolio? Do you have a plan mapped out? Do you know what to do if your plan starts hemorrhaging money like a stuck pig? Remember ...Online Consumers - What Are They Complaining About? For many businesses, e-commerce represents a tremendous method for generating revenues. To maximize the profit potential, you need to keep an eye on issues that drive your prospects nuts. The FTC maintain a list of the top 10 “dot.cons” complained about by consumers. If your site falls within one of these industries, you must make sure you addre ...Is Your Autoresponder Truly Promoting Your Company? Getting other people to promote your web site is one of the most popular Internet marketing methods around, today. Affiliate relationships are all the rave with people who have web sites. Web marketers worldwide are trading links everyday, in hopes of driving each other's traffic to their respective sites. This is certainly something any hard ...A Critical Review of Metastock 8.0: Is Upgrading Worth the Money If you are like many other traders, you have been eagerly waiting for the release of Metastock 8.0 for one reason, and one reason only, the reportedly redeveloped system tester. Metastock`s one major flaw has always been its lack of back testing capabilities, though previous versions of Metastock are head and shoulders above the competition on o ...Online Stock Trading Among the many revolutionary changes brought about by the advent of the Internet is online stock trading. Once the exclusive preserve of the rich and the wealthy, the stock market has now become a place where even the common man can play a part. Investors today can use Internet client-server technology to trade stocks anywhere, anytime they lik ...Wall Street to Main Street: News, Views and Commentary: June 19, 2006 It’s Monday June 19, 2006, and it’s the first day of the trading week and it should be an interesting one. Verizon (NYSE: VZ) has taken the bull by the horns as they struck a multiyear deal with PBS TV Stations to carry a wide array of PBS programming on the new Verizon TV Business. The lines are getting thinner and the war between phone compani ...Condom Sense: Condoms and the Environment So you are smart enough to practice safe sex (preventing both pregnancy and STDs) by properly using a condom. But what do you do with the condom when you are done with it? Here are some hints on environmentally-friendly condom disposal.Firstly, don’t flush your condoms, ever! Flushing condoms is not the way to deal with them. Condoms ...Iranian Oil Bourse Could Accelerate Uranium Price Rise In mid January, we warned that you might wish to “circle the date March 20, 2006” on your calendars in red. (This past week, June Crude Oil futures hit all-time highs!) That is when Iran, the world’s fourth biggest exporter of crude oil, planned to reportedly launch their new oil exchange, competing with both London’s IPE and New York’s NYMEX, b ...Forex Trading Guide- How to Deal With Forex Trading Buying and selling of different currencies of the world is known as forex trading. Forex or foreign exchange market is the largest trading market in the world. Forex trading market deals with more than US$2 trillion everyday. It has become favorite option for currency traders. Foreign exchange market is extremely different from stock exchange ma ...
|
