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Bull or Bear Market. Does it Matter?


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#1 OEXCHAOS

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Posted 21 February 2023 - 05:12 PM

Mark offers some very nice stuff in the below post, but one aspect bought about vehement disagreement from me (though I'll bet that we're not as far apart as that disagreement might make it look). Mark says,

"Do I actually need to know if this is a bull or bear market?

Is it helpful? - we can argue definitions but most people accept 20% drop as bear, but then, what turns that bear into a 'new bull' get more subjective - shouldn't it be a 20% rise for symmetry?

Personally I use different math - which I'm not going to say - doesn't matter but if someone tells me 'we are a new bull market' they need to give their math - 20% rise, a rise above 200 dma , a higher low/higher high etc ...

But again - does it actually help? I have concluded it doesn't, even though I myself say these things!"

Now, in my work, one of the most valuable things I've learned is the importance of knowing if we're in a Bull or Bear market--or (and this is really important) rather if the market is TRADING LIKE a Bull or Bear market. Which, much like Mark, makes my approach no so much about predicting what the market is going to do. If I know that the market is trading like a Bear and likely to continue to do so for a time, it might be likely to go down 8% or 50% and knowing that it's a Bear tells me nothing about how bad.

What knowing it's a Bear market tells me is that a lot of things that worked like GOLD in a Bull market condition are going to fail in a Bear Market condition. Not knowing this is what drove Trader Nick (one of the best stock pickers/traders I've ever known) out of the business. Same with the highly successful hedge fund manager who came up with and used the approach that I now use in one of my models. As has been said many times before, CONTEXT MATTERS.

 

Now, I have a hard and fast indicator set that will reliably (but not perfectly) tell me that we're in a Bull or Bear market condition, and its pretty good, though it's slower than I'd like. Still very useful, but occasionally late to the party. With my advancing aged and increasing experience, though, I have been able to ascertain certain objective and subjective signs of a changed market condition well in advance of hard and fast objective indicator confirmation. I find this helpful too, at least at keeping me out of trouble.

So, real world application, some time back I started talking about the market being technically in a Bear market condition, but trading more like a Bull. This had me hold off selling longs when the VIX finally went to an IT Sell, because in a Bull Market condition (or a market that is trading like one), the top spotters and IT Sell signals tend to be early, or at least are followed by a head-fake rally to shake loose the early Bears. And, thankfully, that was the right call and we got a decent exit. This also has me thinking that we are just experiencing a correction, not a continuation of the Bear. Of course, this could change, but SO FAR, it hasn't.

I'll also note that should the market come on this week into Friday, we very likely could go into a full on objective Bull Market condition (which is NOT a Buy signal).

 

 


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#2 pdx5

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Posted 21 February 2023 - 05:32 PM

SP500 is still 4%+ ahead form Jan 1st. Average yearly gain for SP500 is 7%+ over last 6 decades. So if we end the year at 4120, it will be just another normal year. Today drop was toolarge to qualify as a bear market drop. Just my HO.


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#3 EntropyModel

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Posted 21 February 2023 - 05:33 PM

Fair point MarkS ( the Mark ..Mark thing has always confused me LOL)  but I did say a key thing there which is IF you can ALIGN with the IT move i.e. the degree of trend one below bull/bear.

I suspect Nick did not do this, but infact, as a trader it implies he didn't  have or  honor stops or they would naturally have taken positions out of the market. 

 

I DO AGREE with you though CONTEXT matters - in that those IT signals work as you say differently in bull/bear context but that is a longer discussion I was trying not to get into !

I will come back this topic and give my 2cents on that maybe in 2023 as I think we're all going to suffer a bit with trying to interpret what kind of  'trend' we have.


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#4 pdx5

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Posted 21 February 2023 - 06:28 PM

Bounce coming on Wednesday from a oversold market.


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#5 GDA

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Posted 21 February 2023 - 11:37 PM

Bounce coming on Wednesday from a oversold market.

Based on data since 2010, odds are 12:1 that tomorrow is an up day.

The stronger the sell-off, the better the odds.


Edited by GDA, 21 February 2023 - 11:39 PM.


#6 pdx5

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Posted 22 February 2023 - 01:06 AM

 

Bounce coming on Wednesday from a oversold market.

Based on data since 2010, odds are 12:1 that tomorrow is an up day.

The stronger the sell-off, the better the odds.

 

Yes, one of the easiest way to make money in a day trade.


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#7 K Wave

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Posted 22 February 2023 - 09:08 AM

 

 

Bounce coming on Wednesday from a oversold market.

Based on data since 2010, odds are 12:1 that tomorrow is an up day.

The stronger the sell-off, the better the odds.

 

Yes, one of the easiest way to make money in a day trade.

 

Unless we don't bounce...then LOB....

 

should have better idea soon....TSLA solid breach of 196 would be clue bounce not coming...


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#8 K Wave

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Posted 22 February 2023 - 09:11 AM

Again...there is a huge air gap in the TSLA 15 min chart...so IF it does not bounce out of the gate, big potential for disaster here...

 

It is about knowing WHERE you are in the chart

 

Rising wedge breaks can be brutal and fast precisely because of these air gaps that develop...

 


Edited by K Wave, 22 February 2023 - 09:12 AM.

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#9 SemiBizz

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Posted 22 February 2023 - 11:46 AM

Mark, we had this argument 15 years ago, check your posts, I have excellent memory of you saying just the opposite.... that you had to know whether you were in a bull or bear market for longer term decision-making.

 

So you have changed your mind, have you?


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#10 OEXCHAOS

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Posted 22 February 2023 - 03:59 PM

Mark, we had this argument 15 years ago, check your posts, I have excellent memory of you saying just the opposite.... that you had to know whether you were in a bull or bear market for longer term decision-making.

 

So you have changed your mind, have you?

Which Mark???


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