It's also important to recognize that there have been extended periods where stock prices, in general, moved sideways. For example, after the bear market decline that took the Dow Jones industrial average from over 1,000 in 1972 down to below 600 in 1974, prices moved within a narrow range for years. The Dow was still under 800 in 1982, before the recent bull market began.
Calling the bottom
Each bull or bear market has its own characteristics. And that is what makes it so hard to define them, except in hindsight. Even declining markets may contain sharp rallies upward. That generates the debate over whether a sudden upturn marks the end of the bear and the start of a new bull market. Or whether it is just "a rally in a bear market."
Some market "technicians" watch for patterns or "waves" -- and compare those patterns with past market behavior to predict future directions for the market. One of the oldest and most respected of these technical patterns is the Elliott Wave Theory.
In a recent column, I noted that Bob Prechter (www.ElliottWave.com), the most respected interpreter of that theory, believes the upswing of the last two months is a "bear market rally," and this market will make new lows.
But Stack, an equally respected market technician, says we've already seen the bottom and are at the start of a new bull market! Stack points out that his technical indicators such as the "advance/decline line" as well as measures of "relative strength" and even popular sentiment indicate the market has already seen its lows.
You see, there are always differing opinions on Wall Street about whether the market -- or individual stocks -- are about to rise or fall. That's the whole point of the market. It's a place where buyers and sellers agree to disagree -- at a specific price. And we'll only know for sure who's right in hindsight! That's The Savage Truth.