[转贴] pullbacks, corrections, bear market

ychen222

http://www.zealllc.com/essays.htm is my bookmark link.

http://www.zealllc.com/2013/spxtopex.htm says

"Stock-market selloffs come in different sizes.  The smallest are less than 4%, and aren’t considered material.  They usually consist of a few down days that quickly reverse.  Bigger ones from 4% to 10% are classified as pullbacks.  They are common within ongoing uplegs, scaring away greed so the upleg can continue higher with rebalanced sentiment.  And the largest selloffs over 10% are known as corrections.

Corrections don’t occur within uplegs, but between them.  Greed grows excessive enough after major uplegs that a serious injection of fear is necessary to restore balance.  And only sharp and large selloffs can introduce real fear.  These corrections run between 10% and 20%, and generate so much fear that the majority of traders wrongly assume the bull is over.  And anything above 20% is a new bear market.

Note in this cyclical bull’s chart that pullbacks have been fairly common.  There were 10 selloffs between 4% and 10% from March 2009 to November 2012, a 44-month span.  Add in the 2 full-blown corrections between uplegs, and that is a dozen major selloffs.  This averages out to one every 3.7 months or so.  Today we are up to a bull-record streak of 6.0 months without even a single pullback or correction!"


I support this idea. Although in the near future(1-2 month) stock market might be good, a correction (10%-20%) even a bear (>20%) could emerge as early as this August.

aimei