How you interpret charts is often determined by your underlying bullish or bearish bias. Here’s one way the bear market charts can be interpreted both bullish and bearish.
If you’re bearish…
The great Steve Miller (aka Slim) points out on the S&P 500 based on the fact that stocks have rebounded to levels typically associated with a bear market.
He compares this rally to prior bear market rallies like 1968, 1974, 1982, 2001, and 2008. In each of those markets, after an initial 22 to 55-week decline, the market typically rallied back 50% of the prior decline. After these bear market rallies, the market continued lower.
Slim points out that the market has almost rallied back back to the 50% level recently.
Nick Reece (@NicholasReece on Twitter) points out that when markets rally more than 50% off the bottom of the advance, they are not bear market rallies anymore. Therefore, any rally that doesn’t exceed the 50% retracement can still be considered to be a bear market rally.
The key to determining whether or not the bear market is over is watching the 50% retracement levels on the major indexes.
Addendum:
Slim put out an update after the market rally during the week of August 1st indicating that the strength of the advance had made him more bullish.
As it stands, the 50% retracement has not been violated and sits around 4250.