TSP Talk – Is the Bear Market Over?

From TSP Talk:

You know it has been a wild market environment when you can have day that is down between 2% and 3%, and it is just a minor pullback from the prior day’s gains. The pullback was on lighter volume which can be considered a plus for stocks.

The S&P 500 is certainly putting up some impressive numbers, but can it keep it up or is this just another bear market rally that is destined to fail? I would sure like to see this bear market end so we can start making some money, but I still haven’t seen the evidence that it is over.

Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

I have posted this 2000-2002 bear market chart many times, and one thing is abundantly clear on it: There are dips and rallies with very distinct lower highs and lower lows. The rallies were very strong, and they always found resistance at the 200-day moving average, something this bear market has not been able to do since last September, but is a possibility.

Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

It wasn’t until early to mid-2003 that we finally saw a definitive break above the 200-day moving average, a higher high on an intermediate-term timeframe, and the 50-day moving average move above the 200-day moving average. So, while you might have missed the first thrust of the new bull market, you would have caught the majority of the bull market gains over the following months and years. Plus, the successful double and triple bottoms may have been a hint to get in a little earlier.

We have seen some positive action, but we haven’t seen the above criteria met yet – no successful test, no higher highs, or positive action from the moving averages. It will come eventually, but not so far. I’m not saying that I will wait for all of the ducks to line up before getting invested, but seeing those technical set ups will be a great confirmation that the bear market is ending. Until then, the bear market rules continue to apply. Sell rallies.

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