Beware Of The Sucker Rally

Bear market rallies can be psychologically painful. They are usually strong, large, and dubious enough to fool many into thinking the bear market has ended. That's why they are referred to as "a sucker's rally" or "bull trap." The top of the below chart from Fidelity Investments gives you some historical absolute numbers as a backdrop. The technical potential retracement resistance levels ("Fibonacci") are in the bottom half of the diagram. The most cited resistance levels by asset managers are 61.8% and 76.4% of wave 1 down. However, it can retrace as much as 99% of the wave 1 and still be classified as a wave 2 bear market rally.