Are we in a new bull market or were the last two trading sessions just a bear market counter trend rip your face off short covering rally?

The S&P 500 closed higher yesterday by 3.06%, another big percentage move after Monday’s 2.59% rally.

The data used to compile the table above are the 2000 bear market (3/24/2000 – 10/10/2002), the 2007 bear market (10/11/2007 – 3/6/2009) and the bull market run that began on March 9, 2009 – January 26, 2018)

The blue shaded area shows the percentage of trading days during the periods noted above that generated 2% or greater moves. The orange shaded areas represent days with 3% or greater and the grey shaded are represents days with 4% or greater moves.

The conclusion, bear markets generate many more daily large percentage moves to the upside than bull markets do.

Does this mean we are still in a bear market? It is certainly one statistic to keep in mind, but as Lee Corso would say, “not so fast”!

The 2009 bull market lasted for 2413 trading sessions of which 61 days generated 2%+ moves, or 2.53% of the time (blue shaded area). However, the first 20 trading sessions of the 2009 bull market generated 7 of those 61 total trading days that generated 2%+ moves. In other words, the first twenty trading sessons of the 2009 bull market generated more than ten percent of the 2%+ moves. Therefore, it could be the beginning of a new bull market or better said it’s too early in this move to make that call, new bull market or just a counter trend rally in a bear market.

So how will we kinow if the stock market has entered a new bull phase? The answer, we need to takes things one step at a time.

The monthly chart above is the 2007 -2009 bear market and the stair stepped green red line is a monthly OUL where the more smoothed green red line is the weekly OUL. One thing is for sure, during the bear market, price never closed above its monthly OUL. Of course this will not pick up an early change in trend signal, but it is one indicator we monitor.

The weekly chart for the 2000 bear market shows that counter trend rallies never closed above the monthly OUL either.

As of yesterday’s close, the S&P 500 was still below its weekly OUL, which may become a battle ground on a further move higher.

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