When Will This Bear Market Rally End and the Next Leg Down Begin? – Investment Watch

Yesterday we put this latest inventory market rally within the context of historic bear market rallies.

By fast means of evaluate.

1. This can be very frequent for shares to rally, and typically by rather a lot and for so long as two months, throughout a secular bear market.

• In the course of the Tech Crash, the S&P 500 skilled 4 rallies, starting from 10% to 25%, and lasting two weeks as much as 2.5 months.

• In the course of the Housing Crash, the S&P 500 skilled 4 rallies, starting from 10% to fifteen% and lasting one to 2 months every.

On this context, the present rally in shares is 9 weeks previous (somewhat over two months) and has seen the S&P 500 rally some 17%.

This begs the query… if that is certainly a bear market rally… when will it finish? Put one other means, when does the following leg down start?

Traditionally, the 40-week shifting common (the identical because the 200-day shifting common) has been a line of GREAT significance throughout bear markets. In the course of the Tech Crash, the S&P 500 was by no means capable of break above this and keep there.

An identical dynamic performed out throughout the Housing Crash. Right here once more, the S&P 500 was unable to reclaim the 200-DMA/40-WMA.

So the place are shares buying and selling immediately in relation to this line?

The S&P 500 is nearly to check its 200-DMA/40-WMA. If historical past is any information, it gained’t be capable of reclaim this line and shares will start their subsequent leg down within the subsequent few weeks.