The Market Cap by Investors Alley - January 6, 2014

The Market Cap by Investors Alley - January 6, 2014

Here is an interesting article about bear markets.  The author decided to define a bear market as something different than the regular 20% decline condition.  For example, he used a 15% decline in his calculations, and this target allowed the inclusion of a -19% bear market that occurred in August of 2011 when Congress could not agree on how to handle the debt ceiling.

The author's study involved the years between 1953 and now, and he determined that we have had 16 bears markets over that time period. The average time between bear markets was four years.  This means that it has only been two years since our last bear market as opposed to five or six years by conventional reasoning.  Moreover, he classified bear markets as "recession" type and non-recession type.

The non-recession bear markets were only half the duration compared to recession declines, 9 months down compared to 18 months otherwise.  Since the economy is currently doing well although not perfect, the author believes that no recession is in sight. I also agree with him that Federal Reserve statistics show that we are in the clear.  Therefore, Brett Eversole believes the next bear market will be the non-recession type.  It will be like 2011 rather than 2008. It will be a small duration with a low double-digit decline before the market continues its climb higher.  Good charting techniques would enable you to get out of the market in time and back in at the proper time for maximum profits.