A bear market rally, or a genuine turn in the market?

A bear market rally, or a genuine turn in the market?

With the Federal Reserve cutting the discount rate 50 basis points to 1%, it remains to be seen if this will loosen up the credit markets. There remains a great deal of mistrust among banks and borrowers at the present time, and until that changes, we would look for the economy to limp along.

The sharp move up, in both the DOW and the other indices on Tuesday was a sharp counter trend rally to what remains a prolonged bear market. One day does not make a trend, and we will not know for some time if the lows we have seen recently in the past month are going to be the final lows of this bear market.

My gut feeling is, that we will see more sideways action in these markets for some time to come. I would not look for any dramatic upside action in stocks. If we do see a further rally from current levels, it would be perfectly normal within the confines of a bear market. If you are inclined to trade these markets from the long side, I suggest doing so with a slightly smaller position than you would normally trade. We expect the volatility level to subside from its current torrid pace and fall back to a more normal level as we move sideways.

The judicious use of a game plan and money management stops is highly recommended for everyone. These markets can cut you into pieces in hours mainly because of the market's inability to fashion out a firm trend either on the upside or downside.

Just because the market is going sideways does not indicate that all is over on the downside. The longer we see these markets move sideways, the greater the opportunity that we may be building a base to carry the markets higher.

Adam Hewison

President, INO.com & Co-creator, MarketClub

8 thoughts on “A bear market rally, or a genuine turn in the market?

  1. Phil has it right on the money more or less, but a few more points.

    Its all in the charts. Indicators are useless...just a money making grab like the mutual/portfolio/hedge fund managers...they do good if they made -25% as the market has dropped -38% ( just an example).

    Where is the logic in this...the "educated" fools just lost your retirement fund, house etc and YOU keep listening to the same old people. There is no logic in this, but PEOPLE KEEP DOING IT. THEY LISTEN TO THE SAME IDIOT WHO TOLD THEM TO BUY HIGH AND NOW IS TELLING MAYBE TO SELL LOW OR BUY MORE. HE/SHE HAS NO IDEA. But he has an MBA from Wharton etc.

    If they never traded ( and I don't mean scalp) they know jack ****.

    "NObody knows What you THINK THEY DO."

    So the next time the "educated fools" with their MBA, CTA etc from them prestigious schools tell you Oil, gold, silver, S&P etc is going somewhere...do the opposite and see what happens.

    Charts don't lie....only real traders trade by the chart ( not technical analysis).

    I would rather listen to the blue collar worker who made it big...than any WAll Street "Fool"...oh I'm sorry, money manager, economists etc.

    "Nobody Knows what YOU think THEY DO."

    Good luck

  2. The key to any move is not found in MACD, Stochastics, Fib retracements or any other technical instrument. The key is found in volume. That will tell you what the smart money is doing. Sharp moves up can be designed to fool the unsuspecting. Follow the volume. If volume decreases with increased prices that will tell you the smart money isn't getting involved or supporting increasing prices. Sharp moves up into new highs and closing on the lows on high volume is another sign of weakness. Short up bars on very low volume shows no demand by smart money. The markets not here to make you rich, it's designed to fool you and take your money. So any advances with decreasing volume is a clear sign of weakness. Like comedian Russel Peters says. "Somebody gonna getta hurt"

  3. This should be a rally that will last a few months, close to being confirmed.

    For 1 thing, the pennant downside target failed to occur and a white candle day ensued from the previous day's low close.

    The retracement on the recent run-up on the FED rate cut has yet to go below the .381 fib ratio for that rally, which is key for a bullish omen for now.

    It points for a bullish move soon unless the .381 is taken out then more sideways action for a very large trading range, great for traders. But price is close to breaking the upper resistance than testing the lower support area.

  4. I`ve just lost 40% of my account playing on countertrend. Thats horrible and I think I am definitely off such tactics. When you are on countertrend you should keep the counsciousness of probability. You are on less probable scenario. In the other words you are the thief not the cop. You are robbering the home in the night where all alarms are on and lawkeepers are coming. So if it happens you better shouldn`t think about the safe, but just grab the silver teaspoon from the table and jump out trough the nearest window.
    You should keep in mind that when you`ll fault, you can will only take a losses but also you will lose the contact with the market.
    So better breath deeply twice. Countertrend is always good opportunity for making some things we usually forget.

    best trades, best money, best live
    for you all

    sorry for broken english 😉


  5. Your last sentence would normally make sense ("greater the opportunity"), but in this case I believe a protracted sideways move for a few(8-16)weeks may just as well indicate a Wave 4, resulting in a sharp Wave 5 move down early next year.

    Just an opinion.

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