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When does a Bear Market Rally become a Bull Market

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We discussed in June how a rally can occur during a bear market. Despite the overall market trend being downward, there are periods when it rises. We warned in August about signs that such rallies would be ending. Markets trended lower throughout September and reached a new bottom at month’s end.

However, US indices have traded higher since October’s beginning. It hasn’t been an equal rally, with the DJIA having much better performance than the Nasdaq, for example (and the S&P sort of splitting the difference). However, the Dow has now surpassed the summer highs. This raises questions about the sustainability of the current trend. We are now at the end.

Where do we go from here?

Usually, the last couple of weeks of the year give extra buoyancy to the markets in what is known as the “Santa Clause Rally”. Typically, after the Fed’s final interest rate decision for the year in the middle of the month, most major traders take a break. Although the liquidity is restricted, it can lead to greater volatility. However, smaller traders are more optimistic.

Since December is about to start, we’re sort of running out of time…



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