The stock market has continued its uptrend. We would have expected more of a pullback by this point. If the stock market continues to push higher in the coming week without a pullback it is possible that our system will trigger a signal of sell. It is more likely that the market will begin a pullback from here.

Many commentators have talked about how the recent highs in the stock market have invalidated the possibility of us still being in a bear market that started in 2000. We feel there are two problems with this argument. The reason that we may have still be in a bear market is that the NASDAQ Composite and NASDAQ 100 have not even retraced the first Fibonnaci percent of 38% from their decline in 2000. At this point, neither index has come close to breaking its 38% retracement and we would need to see a push above the 62% retracement to know for sure that the bear market is over. The second problem with this statement is that by ignoring the NASDAQ Composite and NASDAQ 100 and by looking at the other indices only, we could see in January of 2006 that a new bull market started in 2002 and that we have not been in a bear market since 2000.

The first chart below shows the S&P 500. You can see how the 62% Fibonacci retracement was broken in January of 2006. If we use the 62% area as a measure of where a counter-trend move should stop, then any move above that area would suggest a new leg higher. The second chart shows how the Russell 2000 was breaking into all new highs in January of 2006. The Dow was well above its 62% retracement at that same time as well. The last two charts show the NASDAQ Composite and NASDAQ 100. You can see how far they both are from even breaking the first Fibonacci level.

You can see how someone could have changed their stance on the bull vs. bear market argument in January of 2006, but nothing has happened since then to have a long-term bear turn bullish. If someone was bearish in January of this year due to the NASDAQ Composite and NASDAQ 100's action since 2000, then they should still be bearish now.

Happy Thanksgiving!