So, I hear this is a Bear Market

• Posted by Greg Harmon
• on January 14th, 2016

Shortly after the calendar turned to 2016 I started hearing that equities were now in a bear market. I guess there is a good case for it. The S&P 500 has been down 8 of the last 10 days and has lost over 10%. Momentum indicators are supporting more downside. The purported instigator of this move lower, the Chinese market, continues to fall.

But last year during the August and September pullbacks it was not a bear market. And that move was more pronounced to the downside. In fact I recall many screaming that the definition of a bear market was a 20% correction. It is not even close to that. So I asked the twitter verse this question last night:

I am not trying to pick a fight on this but it seems to me that 10% or 20% are just random numbers anyway. I don’t really care personally if you want to call this a bear market or wait for 20% to do so. Although it does seem to make a difference in sentiment.

But if you want to pick some numbers to be concerned with, I suggest you pull out a chart and look at prior support and resistance levels. The chart above is the same chart I posted several times during the August to October timeframe. The important numbers to watch here are 1885, 1815, 1775 and 1730 to start with. 1885 was support in October 2014 and in August and September of 2015.

1815 matches the tail from October 2014 and the support from April 2014. 1775 was support in November 2013 and February 2014. 1730 was support on the tail in February 2014 and marks a 38.2% retracement of the leg higher from the October 2011 low to the all-time high.

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