Trader’s Narrative

The question on everyone’s mind right now is whether this most recent recovery from the March lows is a real one, marking the end of the bear market, or whether it is just a very large and deceptive looking bear market rally?

Since some of the largest and most intense bear market rallies occurred after the crash of 1929, tere’s a chart showing the recent rally in relation to them:

William Hester of Hussman Funds also looked at this question recently with a more in depth analysis of both the size of the rally and the relationship to volume.

This chart compares the 4 week performance of the S&P 500 prior to the rally and the ensuing 5 week change. Basically, it is an attempt to gauge how sharp the rally is. Data points that clump to the bottom left show a “V” bottom; whereas data points to the top right show a more flat base formation:

Check out the article for more insights, including the role of volume.

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