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In a rising market, this five wave/three-wave pattern forms one complete bull market/bear market cycle of eight waves
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Amplitudes of the correction waves subordinate certain rules: a second wave may never retrace more than 100 percent of a first wave (for example, in a bull market, the low of the second wave may not go below the beginning of the first wave); the third wave is never the shortest wave in an impulse sequence, often, it is the longest; a fourth wave can never enter the price range of a first wave (See Figure 5
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CEO of FNMA (Federal National Mortgage Association), in the hottest bull market in history,
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of a recovery than at the end of a bull market - for both the issuing company and the
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In bull markets, it is
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Although the growth occurred in the context of a long bull market, five to six years can be
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Unless one is in the throes of a bull market, investing in ex-post EVA increases is a
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A bull market will produce about a twenty percent threshold of firms that will out
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The recession of 91-92 was followed by one of the longest bull markets in history
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market, and three out of four stocks will go up during a bull market
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investor’s attempt to capitalize on a bull market, what it lacks in scientific legitimacy, it makes up in timely effectiveness
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One reason that the bull market of the 1990s was a good laboratory for studying
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will rise in a bull market and nine out of ten will fall during a bear market
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The correlation between earnings and price is high and volatile in the bull market, low and volatile in the
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The upward surge of a bull market has been far more
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Don't confuse brains with a bull market
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It would be supremely convenient if, in a bull market, stocks
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most want to know most is whether we are in a bull market,
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in a bull market they are allowed only to move more acutely
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A trailing stop is a one-way proposition; in a bull market
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beginning of the bull market
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positions being taken; the bull market was already two years old
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There can be a circumstance in a bull market in which there is a
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The stock market boom of 1994-2000 in the United States was the culmination of an 18-year advance, an unprecedented bull market that began in 1982
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I date the emergence of the bull market investment crowd from 1995
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stock market? At the peak of the bull market in 2000, Tobin’s q ratio stood at a historical high of 2
27.
Each of the first three market tops ended a bull market that had not been interrupted by any decline of as much as 30 percent in nominal terms or by any decline that lasted as much as eight months from high to low
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These were the bull markets of 1921-1929, of 1949-1966, and of 1987-2000
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In inflation-adjusted terms, prices advanced 496 percent, 334 percent, and 346 percent respectively during these bull markets
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Moreover, only the first of these three bull markets began from the preceding crash low
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The start of the 1949-1966 bull market occurred after 17 years had elapsed from the 1932 low, while the 1987-2000 bull market started 13 years after the 1974 low
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I don’t think we would see such strong bearish information cascades occur in the midst of a bull market leading to a bubble top
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Why did I use 250 percent instead of the larger numbers associated with the three previous bubble bull markets? I wanted to be conservative, yet stay in the same ballpark
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Why 2016? Well, the obvious answer is that if 2008 is like 1921, then since the 1921-1929 bull market lasted eight years this one should, too
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I think it more likely that if a bubble bull market is actually starting in 2008, then it will probably last between 13 and 17 years, putting the top sometime during the years 2021 to 2025
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If 2008 is not the start of a bubble bull market, then the top of the next bubble will be pushed out further in time and much higher in price
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The next bubble bull market would then have to start some number of years after 2008 and from a price level higher than the 2008 low
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Once you think you have seen the starting point of the bubble bull market, you can use the precedents cited earlier to guesstimate the level and timing of its ultimate top
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There are many less dramatic bull market tops occurring in the intervals between major bubble tops
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These less dramatic bull market tops are seen on average every four or five years
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Short bull markets are a phenomenon associated with extended stock market advances, such as those of 1921-1929, 1942-1966, and 1982-2000
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I’ll have a lot more to say about how these short bull markets can be exploited when I describe “The Grand Strategy of Contrarian Trading” in Chapter 11
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Perhaps this was a clue that a bubble bull market was under way during 1987-2000
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A similar situation developed during the bubble bull market of 1921-1929, which was interrupted by subnormal bear markets in 1923 and 1926
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This may prove to be a clue that a bubble bull market is under way the next time we see such a phenomenon develop
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I knew that the typical bull market in the stock market averages lasts about two years
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I believed this to be an accurate assessment of one of the reasons for the bull market in stocks, and I clipped the article because I wanted to keep tracking this story until its end—which probably would be associated with an important stock market top (it was, in 2007)
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I should point out that the bull market in stocks had two more years to run at the time this story appeared
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This was a relatively quick 8 percent drop in prices, normal for a bull market
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The classic examples are the 1921-1929 bull market, during which the Dow Jones Industrial Average rose from 60 to 380, and the 1994-2000 bull market, during which the same average advanced from 3,800 to 11,750
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An equally dramatic example is the 1949-1966 bull market, during which the Dow rose from 169 to 1,000
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Remember that there can be no bear market unless there is first a bull market, and no bull market unless there is first a bear market
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The novice’s second mistake is to seize upon a prominent bullish story that appears very early in a bull market or a very prominent bearish story that appears early in a bear market and conclude that the new trend is about to reverse
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The most spectacular instance of this in my memory occurred in August 1982, just as the Dow Industrials began the bull market that would carry this average from 777 to 11,750 by the year 2000
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The April 24, 2000, issue of Newsweek asked: “Is the Bull Market Really Over?” For reasons evident from other details of the cover, Newsweek was begging for the answer yes
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There had not been time enough and prices had not rallied far enough for a bull market crowd to form
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Note that a magazine cover story might not concern the market directly, but rather an individual closely associated with it, for example the CEO of an industry that has been a bull market leader
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The result was a bull market in bonds and a drop in long-term interest rates that lasted 25 years
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I believed then that a new bull market was just around the corner
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At least three books predicting Dow levels ranging from 30,000 to 100,000 were published right at the top of the 1994-2000 stock market bubble, and this was a definitive indication of a mature bull market crowd
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) I want to emphasize that one need not sell near the exact top of a bull market or buy near the exact bottom of a bear market to beat the buy-and-hold strategy
62.
During a bull market, any above-normal allocation to the stock market should be cut back to normal levels once the averages have risen about 65 percent from the low of the preceding bear market
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When should the stock market allocation be cut to below-normal levels? The worst mistake a contrarian trader can make is to be underinvested in stocks during an extended bull market
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Finally, and most importantly, the 200-day moving average of the S&P 500 must fall 1 percent from whatever high it has reached during the bull market
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How does CTS #3 tell the contrarian trader to act during a bear market? If the bear market results from the disintegration of a bullish stock market crowd that was visible toward the end of the preceding bull market, the contrarian trader would have cut back his stock market allocation to below normal once the 200-day moving average of the S&P dropped 1 percent from its high point
66.
Bearish information cascades in the context of bull markets tend to be shorter in time and associated with more modest drops in the averages than are bearish cascades the context of bear markets
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To take advantage of this, the aggressive contrarian trader must have some way of distinguishing between bull markets and bear markets in the averages
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When the S&P 500 drops 5 percent below its moving average after a bull market of normal extent and duration, the aggressive contrarian can be pretty sure a bear market is under way
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If the average moves 5 percent above its 200-day moving average after a bear market of normal extent, one can be confident a bull market is under way
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I should point out here that I think that for bear markets in general it is better to be concerned only with the extent of the bear market (the percentage drop from the preceding bull market high), because the time duration of bear markets varies wildly
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Now for the details of this long-only strategy: In a bull market the aggressive contrarian trader wants to be on the lookout for bearish information cascades
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One must remember that bearish cascades in a bull market tend to be very brief, lasting a matter of days or at most a few weeks
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In other words, it will identify a bull market only after the low of the preceding bear market has occurred, and a bear market only after the high of the preceding bull market has occurred
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But missing the start of a bull market can be a very expensive mistake
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It is in the early stages of a new bull market that the buy-and-hold strategy makes its biggest percentage gains, and the aggressive contrarian trader generally does not want to wait for the bull market signal from the 200-day moving average before adopting a bull market policy
76.
If the most intense bearish cascade (as measured by the number, frequency, and semiotic content of media stories) occurs after a bear market has dropped the averages a typical amount, I am willing to bet that the bear market is complete and that the next up leg will be the first of a new bull market
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Once I have an above-normal stock market allocation because think that the first leg of a new bull market is under way, I then wait for the S&P to rally for at least six months and 25 percent from its bear market low
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These bull markets in individual sectors, stocks, or commodities often show great percentage gains over fair value and can make a very significant contribution to a contrarian trader’s investment results
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No one imagined then that the greatest bull market in history was about to begin
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But once the S&P 500 reached the 250 level in 1986 and had risen 65 percent from its July 1984 low at 148, the conservative contrarian trader would have reduced his stock market exposure to normal levels because the bull market had entered a zone of potential overvaluation based on historical tabulations
81.
The Contrarian Rebalancing strategy dictated a reduction of stock market exposure from above-normal to normal levels at this time because the bull market had met normal expectations for duration and extent
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In February 1994, with a normal stock market allocation going forward, he has to know how he will act should the 200-day moving average of the S&P drop 1 percent from any high level it attained during the bull market
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The definitive history of the remarkable 1982-2000 bull market has yet to be written
84.
Since the hypothesis I adopted in May 1988 was that a bull market was under way, I wanted to follow the special rule appropriate for the first leg up in a bull market
85.
At the time I was very bullish and believed that a new bull market had started
86.
During the first leg of a bull market the aggressive contrarian wants to maintain an above-average stock market allocation for at least six months, awaiting an advance from the bear market low point of at least 25 percent
87.
At this juncture I was willing to bet that a new bull market was beginning
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This was a gamble because it had been evident since 1996 that a substantial bull market crowd had developed
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END OF THE GREAT BULL MARKET
90.
The greatest bull market in the history of the United States began from the lows established in the Dow Jones Industrial Average and the S&P 500 index in August 1982
91.
The S&P reached its bull market peak on March 24, 2000, at 1,527
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How would the contrarian trader have been positioned as these averages were ending this record-breaking bull market in early 2000? Keep in mind that the biggest mistake any contrarian trader can make is to be underinvested for any substantial period of time in an extended bull market
93.
Beating the market means outperforming the buy-and-hold strategy, and it is during long bull markets that this strategy shines
94.
A move to below-normal exposure for the conservative contrarian following the Contrarian Rebalancing strategy would await a turndown in the 200-day moving average of the S&P 500 by 1 percent from its bull market high
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These tactics would help both types of contrarian trader remain invested in the bubble bull market as long as was prudent
96.
Doing this does not require getting out of stocks close to the tops of bull markets and getting back in near the lows of bear markets
97.
It is very hard to identify the top of a bull market, but much easier to see when a bullish crowd is about to disintegrate after such a top has probably developed
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However, in this chapter I will pass over the short selling opportunities open to the aggressive contrarian trader during this postbubble bull market
99.
In March 2000 I believed that despite these warning signs the bull market had further to run
100.
From there I thought that a normal bull market would evolve, one that according to my tabulations would last about two years and carry the market up about 65 percent or perhaps a little more