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What happens when a Bear Market Rally becomes a Bull Market

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We discussed in June how a rally can occur during a bear market. Despite the market’s overall downward trend, there are periods when it rises. We warned in August about signs that such rallies would be ending. All through September, markets trended lower until they reached a new low at the end.

The US indices are generally trading higher since the beginning of October. It hasn’t been an equal rally, with the DJIA having much better performance than the Nasdaq, for example (and the S&P sort of splitting the difference). However, the Dow has now surpassed the summer highs. This raises questions about the sustainability of the current trend. We are now at the end.

Where do we go from here?

Usually, the last couple of weeks of the year give extra buoyancy to the markets in what is known as the “Santa Clause Rally”. Typically, after the Fed’s final interest rate decision for the year in the middle of the month, most major traders take a break. While tight liquidity can cause higher volatility, small traders tend to be more optimistic.

Since December is about to start, we’re sort of running out of time…



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