Three losses in a row occur slightly more often in bear markets than when prices are moving up. However, given the small difference in their frequency, as shown on our graph, today’s pattern is far from a robust signal that lower prices are ahead, that this bull market’s end is near.
This pattern accounted for 2.3 percent of all closes during the 2000/2003 decline; so far, it happened on 1.4 percent of the sessions, in our current bull market that began in 2009. Thus, because this pattern is more likely during price contractions, this configuration would yield to projecting a coming bear market. However, our judgment is that these frequencies are too close together; that the differences are too small to make a call.
Nevertheless, given the continuing focus on interest rates, the ongoing declarations by the Fed’s officials, and the fact that the interest rate on the ten year Treasury debt keeps rising, the certainty of higher prices surely is in question.
Further, the age of this expansion, now 1,116 days since the last bottom, presents a risky outlook, given that the 1996/2000 bull market lasted just 1,059 trading days, and that even the longer 2003/2007 price gains ended after 1,153 days.
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