Is There a Percentage Rally that Confirms a Change in Trend?

QUESTION: Hello Martin,

Can you verify the following statement:

“No bear has ever resumed following a 20% rally.”

As today marks a 21% move of the lows your expertise would be appreciated.

Thanks!

BGG

ANSWER: No. Sorry. That is total nonsense. The rally from 1982 into 1983 moved from $297 to $520 — and guess what— new lows unfolded. Look at this from the reversal perspective. We elected three monthly bullish reversals on that rally and stopped with the fourth. I really do not understand why these people just bullshit everyone. They clearly have no regard for those they tell this garbage to.

Here we have the silver manipulation of 1997-1998. Here too, we have a 77% rally. Whoever is claiming that a bear market rally exceeding 20% confirms a change in trend is either trying to sell something or is so biased that they cannot possibly be an analyst. If you want to be an analyst, you have to remain dispassionate. Simple as that. No conflict of interest and no predetermined expectation.

Above is the Japanese Nikkei. Between 2003 and 2007, the rally was 140% yet still new lows were made. There we elected, again, only three of the four monthly bullish reversals.

So, sorry. There is no hard and fast rule that states if a market rallies x% then the trend has reversed. That is a very primitive way of trying to look at markets. You cannot even assign a specific stop-loss based upon a percentage. This is what the reversals are for and this is the risk model analysis provided in the reports. The risk is in both directions.