One Way to Tell If Bear Now Rules

Today’s chart is the one I’ve been trading for the last week.  It is bearish, with an unfulfilled downside target at 2492.75 and a worst-case low of 2377.25. If you play it strictly by the Hidden Pivot rule book, the futures became a ‘mechanical’ short when they rallied to the green line (2668.25) near the end of Monday’s session. Since the trade calls for a stop-loss at 2727.00 that would risk nearly $3000 per contract initially, I would tend to use charts of much smaller degree, ‘camouflage’-style, to pare the risk of getting short to more like $60-$100 theoretical. I offer the chart not for your explicit trading guidance, but to allow you to see more clearly the bearish framework within which the rally from Friday’s low has proceeded. I am not persuaded strongly either way as to whether a bear market has begun, although my gut instinct leans in that direction at the moment. I would feel more strongly about it if: 1) the mechanical short from 2668.25 goes on to become a big winner; and, 2) the implied downdraft easily exceeds the 2492.75 target. In any case, I will continue to trust my technical runes above all, since they are free of the emotions and dubious citations of fact that are dominating public debate right now. From a practical standpoint, getting a good read on the bull/bear will require paying attention to one simple piece of evidence, to wit: If downtrending, ABC-type corrections start to exceed their ‘D’ targets, and upward ABC patterns start to fall short of theirs, that would shorten the odds that we are indeed in a bear market. Stay tuned if you care.