How The Stock Bull Market 'Should' End

April 15, 2015

Today’s chart is a composite weekly that shows the entire bull market, going back to 2009. You don’t need a degree in technical analysis to see that it has gone on for long enough to be considered mature. On the other hand, the average bull market lasts 97 months; this one is only in its 74th month. From a purely visual standpoint, however, it lacks a dramatic ending. Look at the price action since December. Stumbling and bumbling its way higher since last November, the S&Ps’ tortured ascent clearly suggests a topping process, but not an actual top.  More visually satisfying would be a collapse following a bold leap into record territory. At that point, the last bear will have been gutted and disemboweled, and everyone else would be crazy bullish.

I can think of a dozen good reasons why the bull market should end here and now. Lately, it has looked like hell, and even Apple, a key bellwether, can’t seem to make much headway. What I expect, however, is not an anticlimactic end to the bull market such as would occur from these levels, but rather a scary plunge that would turn almost everyone bearish. And then, finally, the coup de grace: a final, spectacular rally to new highs that would trap bulls and bears alike — trap them so badly that even financial geniuses who have been half-ready for it would find no exit.

Waiting for this scenario to play out will probably require more patience than I’ve got. Also, more courage and conviction, since a scary decline from these levels is going to seem like the real deal. Europe will seemingly be on its way into Depression, China’s investment bubble will be imploding, and American consumers will be completely tapped out. Could one last rally evolve from such psychological depths?  We shall see.


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