Normal
I think an indicator such as a moving average is ideal. A MA, by definition, is a lagging average. So if the index retraces all the way back to below a MA, then you can argue the trend is over.The only question is how many days should that MA be? I don't think you'll find consensus on a particular figure.That's right. You could wait until the market fell below the MA sufficiently to "prove itself" before reacting. For instance, if the market trends below the MA for a week or two and continues downward, you could retrospectively call the MA cross the start of a "real" correction or bear market. Kind of like The Fed gives an initial GDP figure, and then confirms or retrospectively revises it a month later.That's the official definition. I'd argue it's really no better. What do you call a market that drops by 20% from its peak, and then sideways trends for 3 years. Is it a bear market? Yes. But also it's not going down anymore, so no. I feel it has the same limitations at the moving average cross.I guess a better definition of a bear market is one where each month's low is lower than the previous month. Or something along those lines.An excellent question btw.
I think an indicator such as a moving average is ideal. A MA, by definition, is a lagging average. So if the index retraces all the way back to below a MA, then you can argue the trend is over.
The only question is how many days should that MA be? I don't think you'll find consensus on a particular figure.
That's right. You could wait until the market fell below the MA sufficiently to "prove itself" before reacting. For instance, if the market trends below the MA for a week or two and continues downward, you could retrospectively call the MA cross the start of a "real" correction or bear market. Kind of like The Fed gives an initial GDP figure, and then confirms or retrospectively revises it a month later.
That's the official definition. I'd argue it's really no better. What do you call a market that drops by 20% from its peak, and then sideways trends for 3 years. Is it a bear market? Yes. But also it's not going down anymore, so no. I feel it has the same limitations at the moving average cross.
I guess a better definition of a bear market is one where each month's low is lower than the previous month. Or something along those lines.
An excellent question btw.
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