MAILBAG QUESTION:

"There was a bit in a recent traders column where you described the downturn of May into September of last year as bear market, but isn’t a bear market a bigger thing than what happened in that period? the dow went from i think it was 12800 to about 10600 or about 17%. if this wasn't a bear market what was?"

MY RESPONSE:

I'd say that the decline from spring to fall of last year was a 'typical' down-up-down or a-b-c correction, but you're right in that I mislabeled it as a bear market (using capitol A-B-C's) rather than a small letter a-b-c (down-up-down) correction WITHIN an overall Bull Market.

The chart with my prior highlights that our Subscriber makes reference to is this first one that follows. The decline in question, the middle one highlighted in yellow, was in the 17% range.

Let me back up and go back to the 'drawing board' so to speak and show you what I think can be properly thought of as the LAST Bear Market we've seen in the U.S. and which is reflected in my next chart for a more e-x-t-e-n-d-e-d period than seen above.

The question is about Bear Markets of a GREATER 'degree' than bearish corrections within a Bull Market.

The chart highlights on my weekly S&P 500 line/Close-only chart note the end of the first major decline ('A'), the second corrective upswing ('B') and the end of the bigger ('C') decline. The smaller degree corrections labeled 'a-b-c' that came well after this last Bear Market comprise the 2 corrections typically seen within a Bull Market. A bull market having FIVE (5) parts or segments (beginning after the 2007-2009 Bear Market ran its course).

In the Bull Market dating from the 2009 bottom, there are 3 major advancing waves, broken up or interspersed with 2 down-up-down (small letter 'a-b-c') corrections. The one ending in mid-August of last year (2011) was, as pointed out by our OIN Subscriber as a relatively 'minor' one of 17%.

Interesting when you consider a 17 percent drop a minor one! But in context and a matter of the degree of SPX's advance from the 683 area, last year's sizable summer decline IS relatively minor. Since I've now labeled the run up from August of 2011 as a 3rd and presumed final 'wave' or advance of a major Bull Market, as seen above, a question arises as to what's up with our most recent correction?

Is there a further run up that may get tacked on to the Market advance from mid-August thru March? My interpretation so far is that there is another run up that will EXTEND or go above the August 2011 to late-March 2012 advance. I've notated my next weekly S&P chart with my interpretation of the pattern that I think is unfolding.

If INSTEAD of my more rosy (read bullish) interpretation of what's happening, there's a decisive downside penetration of the prior (6/1/12) weekly Closing Low in SPX at 1278 (2747 in COMP), the question of another significant advance that is likely going to go beyond or HIGHER than 1408 in SPX is called into question.

We'd all like to read the future as far as stocks and the Market and (Elliott) wave interpretations, although speculative, are the only technical way that seems to work often enough to be useful for investment and trade strategy consideration.


GOOD TRADING SUCCESS!