Related Topics
Stocks , Investing

Bear Market Rallies: Here’s a Key Insight

How investors get snookered into the belief of “a further market advance”

by Bob Stokes
Updated: September 20, 2022

Nothing raises the hopes of the bullishly inclined like a rapid bear market rally. And there's been several since the early January top in the Dow Industrials and S&P 500 index.

You may be interested in a key characteristic of most of these rallies.

Our Sept. 12 U.S. Short Term Update explains with this chart and commentary:


Sometimes the upward push will end at or near top tick of the daily range. A quick glance at the countertrend rallies since the January peak in the S&P shows at least five instances of this happening, indicated by the red arrows on the chart. The final trade of these daily ranges was at or very near the high of the day, creating belief in a further market advance when in fact it was the top of the rally.

Keep in mind that "not every strong up day that closes at top tick marks the end of the rally but the end of the rally is often attended by strong up days that close at top tick."

That said, here are just a couple of examples in recent months of the lingering optimism:

  • Why There's a Chance the Stock Market Has Hit Bottom (Barron's, July 19)
  • Top Investment Ideas for a Market That Might Have Hit Bottom (Bloomberg, Aug. 4)

In other words, memories of the prior bull market die hard, even several months after the S&P 500's record high near the start of the year.

And, regarding those July and August headlines about a market bottom, that didn't turn out to be the case. Here's a Sept. 16 headline (CNBC):

FedEx plunge could spell bad days ahead for market as bellwether Dow Transports index hits new low

The question is: Will other indexes -- like the S&P 500 and Dow Industrials -- also plunge to new lows?

Now is the time to get our latest Elliott wave analysis of the U.S. stock market by following the link below.

Trying to Get a Handle on All This Stock Market Volatility?

Most investors are wondering whether the "worst is over" or, if the "worst is yet to come."

You don't have to "wonder."

You see, our Elliott wave experts' high confidence forecast tells you what to expect next, so you can be confidently prepared.

Learn what our analysts -- backed by more than four decades of market observations -- are saying now about U.S. stocks, bonds, gold, silver, the U.S. dollar, the U.S. economy and much more.

Just follow the link below.

Financial Forecast Service


All month long, Financial Forecast Service helps you stay ahead of the waves in the U.S. markets on the timeframes that matter the most. FFS covers the stock indexes, bonds, gold, silver, the U.S. dollar, as well as market psychology and cultural trends. It is our most popular service.

Comprises the monthly Elliott Wave Financial Forecast, 3x-per-week Short Term Update and at least 12x-per-year Elliott Wave Theorist.

“Lizard People” and Other Conspiracies: What’s Social Mood Got to Do with It?

In a word, everything. From political conspiracies to Covid-related ones to the theories so bizarre that they seem too silly to be relevant, we live in the golden age of conspiracy theories. And while it’s easy to blame social media for their spread, we think the roots go deeper. Watch our new Mood Riff episode where the host Greg Eident explains some fascinating socionomic findings on the subject.

Investing: What You Can Learn from Mom and Pop

Sentiment indicators provide valuable information, yet they are best used in conjunction with Elliott wave analysis. Here's one time-tested indicator that has recently displayed a "big surge."

Market Trek: "No crowd buys stocks of other countries intelligently"

When you track historical patterns of foreign investments in U.S. equities, an important picture emerges. Watch as our Market Trek host Brian Whitmer walks you through a chart of the collective foreign buying interest going back to the 1990s and through today. (Brian's global destination is South Korea.)