Where Are We Now?

[Click on chart to enlarge]

In the past, I have published this chart from time to time featuring some of the worst bear markets in history, and how they compare to each other in severity and duration.

Thanks to Doug Short for constantly updating and publishing these Mega-Bears.

You can clearly see how the S&P; 500 (blue) has fared since the 2000 peak along with the rebound from March 09. It now remains to be seen whether this stimulus induced rebound can continue, or if we eventually follow the way of the Dow from 1929 to 1949 (gray). I have indicated a possible directional change with the red arrow and question mark.

Given the current economic landscape, I believe the odds are higher that we are following the 1929 scenario than continuing higher and taking out the 2007 highs.

Of course, this is nothing but an educated guess on my part, but the point is that you must be prepared for the possibility of a downturn via my recommended trailing sell stop strategy.

If the market shows a similar future performance of any of these 3 scenarios, simply buying and holding any investments will destroy your portfolio.

Follow the trends, keep your sell stops tight, and you will have increased your odds of better dealing with the unknown.

About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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