Is This a Bear?

This indicator was built to flag the possibility of major market declines coming ahead of time, similar to those of 2008.  I am an eternal optimist when it comes to the markets, but this signal marked “X” has foretold every single bear market in history.  Sure, there have been some false signals where the bear was short lived.  All in all, it has shown up 4 times in the last 20 years.  It was falsely triggered during the European debt crisis in 2011 and again in 2015 for a short time.  Those turned out to be severe market corrections rather than a multi-year bears.  However, the other 2 occasions were 2000 and 2008!

Therefore, this cannot be ignored.  And unless there is one hell of a rally into year end starting with the Fed decision tomorrow, there is no cancelling this signal now and I will be forced to trade less in the coming weeks/months.

Bottom line, when this signal hits and closes on the month end under the zero line, I am only allowed to take signals when the daily trend is clearly pointing up.  I use an indicator called supertrend for that.  As even in the worst market declines there are large rallies in between.  

At the end of the day, if you can protect yourself during bear phases, there are so many opportunities ahead.  Corrections AND bear markets are good for disciplined traders.  It just requires a little more patience, but it brings valuations down to being cheap so we can ride the new bull all the way up again.  The trick is to not ride it down!

Let’s see where it is at on Monday, December 31st 2018

Leave a Reply