February 5th. 2018


Are we in a pull back, correction, or in a Bear Market?

Answer: You can know if we are in a bear market or not by looking at a 30 day RSI setting and the 3 key indexes (the SPX, the NDX, and the RUT).

A 30 day RSI is almost magical because you can draw trend lines off of it that will hold well on the individual indexes.   If we are in a Bull Market, a 30 day RSI will have a reading of 50% on each of the above mentioned indexes.

As deterioration starts to occur … one or more Indexes will have a reading below 50%.  If one or two have such a reading, then there is definitely deterioration going on.    If there are only two out of three indexes with a below 50% reading on the 30 day RSI, then there is definitely deterioration going on, but 3 out of 3 changes the everything and we are then in a down trend.

Three out of three means that severe deterioration is happening,  and that a pull back or correction is happening.  If the reading is still above 50% on the indexes, then a pull back or correction is occurring and a rebound is very probable.   I said very probable and not guaranteed because it is up to the VIX level and whether or not we jump  to a panic level. (If panic sets in then the panic emotions have to be relieved before the market can resume its trending).