Note:
I am summarizing it from the Technical Analysis book by Edwards and Magee.
3 Phases The Bear Market
1. Distribution Phase
- Starts from the later stage of the preceding Bull Market
- Farsighted investors sense the fact that business earnings have reached an abnormal height and unload their holdings at an increasing pace.
2. Panic Phase
- Buyers begin to thin out
- Sellers become more urgent
- Downard trend of prices suddenly accelerates into an almost vertical drop
- Volume mounts to climactic proportions
- There may be sideway movements after this and then…. the third phase begins
3. Final and ‘dump them’ phase
- More discouraged selling on those who have hold their ‘gems’ till the last or have bought it in the Panic Phase because it is cheap
- Business news now begins to deterriorate
- Downward movement is less rapid
- Better-grade stocks decline more gradually
- And it will be over before the last of the bear news is out
What do you think? Do you agree that we are now in Phase 2?
I have attached SPX chart to highlight the phases that I think we are in.
