Have You Felt Like A 'Genius' In This Bull Market Or Have You Felt Lost?

There is an old adage in the market which says that "everyone is a genius in a bull market." What that really means is that as long as you keep looking to the long side in a bull market, you will be seen as a genius.

But, remember, one of the main perquisites for maintaining "genius" status is that we must be in a "bull market." So, how do you know when a bull market is coming to an end?

Many view a 20%+ decline as suggesting we are in a bear market. To explain the extent to which many hold fast to this perspective, allow me to provide you something that I witnessed recently.

A few months ago, when we were still in the 2800+ region, I posted a warning on another article for a drop to the 2100-2200 region, while noting that we were still likely to remain in a bull market. The author of that article chided me for this perspective. While I raised cash when we broke the 2880SPX support region, this author held his longs during the decline to the 2300 region, and claimed that since it was not a bear market, he was right for doing so. His perspective was based upon us not being in a bear market because the SPX declined 19.8% based upon his calculations using a "closing basis" for the market. I just shook my head in disbelief.

How or why investors came up with that arbitrary 20% number is simply beyond me. And, I can assure you that it is an arbitrary number because we can see declines larger than 20% and still remain in a larger degree bull market. But, does that mean you should hold or not protect your longs during a 20-30% decline?

You need to understand the larger context of the market in order to understand this perspective. Unfortunately, most market pundits, analysts and investors lack the tools for understanding the larger context for the overall market. This leaves them simply guessing, and makes them no different than a retail investor or even an average stock broker.

And, the guessing becomes comical sometimes. Too many place their reliance on events as being market drivers. This leads to quite unusual results.

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Ayelet Wolf 6 months ago Member's comment

I enjoyed your work. Where can I find more?

Alexis Renault 7 months ago Member's comment

I admit... I've felt lost!

Henry L. Morgan 6 months ago Member's comment

Ditto

Adam Reynolds 7 months ago Member's comment

Good stuff.