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Bear market rally?

Is the US equity market on a bear market rallie? A bear market is defined as a correction of 20% or more from the prior peak, and a bear market rallie is defined as a short move upwards from the local bottom. Typically, these moves do not retrace more than 50% of the fall, and then the bear market continues. In the chart below, you can see several examples since 1929, with their retracements. In this year’s case, the retacement has reached 64%, surpassing the prior strongest move on 1948. It’s therefore becoming increasingly difficult to think in terms of a bear market rally when we’re approaching 2/3rds of the movement down. The next few weeks can define the direction of the market until the end of the year.

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Chart source: Jurrien Timmer, Fidelity



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