"There's a bear in the woods" was the opening line of a TV ad for Ronald Reagan's 1984 presidential campaign. The commercial featured a bear wandering through a forest accompanied by narration suggesting that the bear could be tame or dangerous and that it would be wise to be prepared for the latter. http://www.wikio.co.uk/video/ronald-reagan-tv-ad-bear-105484 Reagan's ad has been interpreted to mean different things, but to me the bear was a clear allusion to the USSR and the Cold War.
Anyhow, whatever its original purpose, I think it is the perfect metaphor for the current state of the stock market. The following chart illustrates that there is definitely a bear in the market. It could be tame or dangerous and it would be wise to be prepared for the latter.
This chart shows the All Ords for the past 3 years (click to enlarge). You will see that the rally from the March 09 low retraced about 50% of the previous move down. I have seen the 50% retracement level stop rallies in major bear markets before and now I am concerned it has done it again. Keep your eye on 4360. If the market falls below that point this week, the bear will turn dangerous and he will probably have a few dangerous mates with him.
This graphs really helps me see the significance of the GFC.
ReplyDeleteWhat is the separate red chart at the bottom representing?
ReplyDeleteThe "red chart at the bottom" is called a histogram. It plots the difference between a 5-day and 35-day simple moving average. This histogram has many uses. One is to verify Elliot Wave counts. Another is to measure momentum.
ReplyDelete