Generally speaking, rules-of-thumb shouldn't be rules-of-thumb. They often turn something overly-complex into something overly-simplistic. Nonetheless, they have a purpose when they explain how other people are thinking.
One rule-of-thumb is that stock market corrections (down at least 10%) and bear markets (down 20%) don't bounce off the bottom and then go up. They have to hit bottom twice. It is called "testing the bottom." If it doesn't pierce the previous bottom and then goes back up, we say the bulls are running again. If it does pierce it and goes lower than the previous bottom, the bears will run until that new bottom is tested.
The current bottom for the broad market S&P 500 was 1,867 on August 24th. (It is about 1,950 now.) So far, we have not yet tested the bottom. That suggests the bulls will not run until we do approach 1,867. Of course, by that point, many people will be lining up at the window to jump.
When we approach 1,867, don't be scared - just rejoice, because we may just be putting the correction behind us . . . where I like it!
One rule-of-thumb is that stock market corrections (down at least 10%) and bear markets (down 20%) don't bounce off the bottom and then go up. They have to hit bottom twice. It is called "testing the bottom." If it doesn't pierce the previous bottom and then goes back up, we say the bulls are running again. If it does pierce it and goes lower than the previous bottom, the bears will run until that new bottom is tested.
The current bottom for the broad market S&P 500 was 1,867 on August 24th. (It is about 1,950 now.) So far, we have not yet tested the bottom. That suggests the bulls will not run until we do approach 1,867. Of course, by that point, many people will be lining up at the window to jump.
When we approach 1,867, don't be scared - just rejoice, because we may just be putting the correction behind us . . . where I like it!
