Are We Still In A Bear Market?

The Cabot Tides system uses 5 indexes to determine the intermediate trend of the market: MLO - Merrill Lynch Technology Index, NYSE Composite Index, Nasdaq Composite Index, S&P Smallcap 600 Index and the S&P 500 Index. When 3 of 5 are in an intermediate uptrend, then the trend of the market is up. When 3 of 5 are in an intermediate downtrend, then the trend of the market is down.

But what about the long term trend? A very good way to determine the long term trend is to look at the 6 and 12 month emas of a market or index. When the 6mema is above the 12mema, the long term trend is up. For stock indexes, there are few whipsaws. This basic method would have produced positive returns even in the volatile 1970s.

Applying this analysis to the above 5 indexes, we see that the 6mema is less than the 12mema for all 5 indexes. In other words, we have been in a very good intermediate term rally within a still ongoing bear market no matter how you look at it.

However, before you go and try to trade this as a system, I must warn you that the way this rally is shaping up I do expect a whipsaw later this year with these moving averages. If you do use them, wait for confirmation, and the second positive signal is likely to be better than the first.