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Technically There Have Been Two Bear Markets Since The Global Financial Crisis

|Includes: IVV, NDAQ, QQQ, SPDR S&P 500 Trust ETF (SPY)

What do I mean by technically?

Bulls vs. Bears.

Ten Years of Trend Following.

By technically I mean technical analysis, the study of historical price movements. Early signs of technical analysis were first noticed during the early 18th century via candlestick charts. Homma Munehsia used candlesticks to trade an early version of rice futures in Japan[1]. The more notable historical references have been the works of Charles Dow through Dow Theory and his book Stock Market Theory. Today, technical analysis has integrated itself in trading & investment management, utilizing chart & pattern analysis, trend analysis and market indicators in analysts’ and managers’ operational & strategic activities. The financial world has also utilized specific technical analysis jargon such as a bull and bear market.

Definitively, a bull market is one where a security or group of securities (through an index) increases by 20%. A bull market is usually characterized by declining unemployment, increases in corporate profits and an overall improving economy. Conversely, a bear market entails a security or group of securities declining by 20%. A bear market is typically characterized by increasing unemployment, declining corporate profits and an overall economic decline[2]. With the quantifiable definitions in place (20% move), one can easily discern a bull or bear market.

The journey of bull/bear market identification takes us back to the end of the Global Financial Crisis, which was universally characterized as a Bear Market. Issues of contention in bull/bear market identification have occurred post the Crisis. Chart 1 below illustrates all the bull and bear markets that occurred after the Global Financial Crisis.

Chart 1 – Weekly S&P 500 Index Chart from September 2008 to March 2019

Table 1 below details the bull and bear markets.

Table 1 – Bull & Bear Markets from March 2009 to March 2019

Since the Global Financial Crisis, there have been 3 bull markets and 2 bear markets in US equities (proxied by the S&P 500 Index). The latest of the 3 bull markets began in December 2018, where it took the S&P 500 Index less than 3 months to increase over 20% in value. The last two bull markets lasted on average 4.58 years and produced an average return of 139.54%. On the other hand, there has been only 2 bear markets since March 2009, with the bear market lasting 0.33 years and causing the S&P 500 Index to decline on average by 20.90%. From this information one can conclude that the US Equity market is in a secular bull market.

A secular bull market large and long positive capital appreciation in a single security or group of securities. Secular markets are typically driven by large-scale national and international trends, which could occur concurrently. While there may be intermittent corrections or even bear markets, the overall bull market trend is maintained[1].

Technical Analysts pay attention to the state of the market as investing strategies will be different in a bull market than in a bear market. Bear markets are compounded with increased volatility. Stop loss orders may be tighter and portfolio turnover may be higher under these conditions as technical analysts continuously position themselves to mitigate losses in the respective market. Also, if a bear market is identified, short positions on securities or indices will be more likely. Moreover, technical analysts may utilize more technical oscillators, bands and envelopes in bear markets and more trend following strategies in bull markets.

Indeed, by simply identifying the state of the markets, investors are better positioned to add value to their portfolios.


Cedric Thompson, CMT

Mr. Cedric Thompson, CMT currently serves as a Senior Portfolio Manager at the Trinidad & Tobago Unit Trust Corporation. Mr. Thompson earned a BSc. in Actuarial Science from the University of the West Indies, and a Masters of Business Administration from Cass Business School, where he wrote his Business Mastery Project on creating a US Sector Rotation Fund. Mr. Thompson, is also a Chartered Market Technician and has been published in a technical analysis Bloomberg Newsletter. He has close to a decade of investment management experience, and has worked with the Trinidad & Tobago Unit Trust Corporation in several roles which encompass investment research, analysis, strategy and portfolio management.


[1] Nison, S., Japanese Candlestick Charting Techniques: A Contemporary Guide to the Ancient Investment Techniques of the Far East, 1991