Market: The the counter-trend rally up from Dec 24th continues. Read on for context.
Below is an Excel table illustrating the parallel between the bear market decline of 2007-2008 to the current bear market decline starting October, 2018. Key in this table (and accompanying chart) are the alternating price movements down-up-down. The table measures these alternating legs in percentages as well as days. It is the percentage moves that are most important, and striking.
The market is currently in an alternating up move from the lows in late December. This will be followed by a new and likely precipitous leg down. It is in the legs down that we will make the most money in a bear market. In 2007-2008 there were a total of 11 legs, 6 down and 5 up. We have only seen one market move in each direction so far, suggesting that if this parallel holds true, there are at least 5 more legs lower. The gains from the system sell signals generated in November and December represent what could be realized in each approaching and then successive leg down. The moves up are too dangerous to trade as they are counter the dominant trend.
Pattern recognition theory says that this bear market will be worse than that of 2007-2008 and possibly even worse than the dot.com crash of 2000-2002. If so, these numbers might be understating the percentage declines for each leg down. Our trading philosophy and strategies are all finally coming together and this is the time to be fully committed the trading system. There should be at least five more times in the next 12-18 months when minimum expectations for each trade will be +100%. No matter how you have done with the system in 2018, this year offers an exceptional trading opportunity based upon this one almost all but proven assumption: We are in the early stages of a global bear market. Risk: We are not. Reward: We are. I'm betting on the latter.
Dow Jones Industrial Average - Parallel Bear Markets