Study: do all bull markets need to have a bearish divergence?


The Medium-Long Term Model states that this bull market has 1-2 years left. As a result, we are tryin to catch the bull market’s top as accurately as possible.
The January 2018 top did not have a weekly bearish divergence. Momentum (RSI 14) peaked at the same time as the S&P 500.

I frequently state that bull markets end AFTER momentum has weakened. This isn’t 100% true.

  1. Bull markets cannot end when momentum is EXTREMELY strong as it was in January 2018. When momentum is extremely strong, there must be a bearish divergence before the bull market can end. (See study from January)
  2. Bull markets don’t have to end with a bearish divergence (weekly bar chart). 3 historical bull market tops had bearish divergences. 1 bull market top did not have a bearish divergence.

Let’s look at the historical bull market tops in detail.

October 2007 bull market top

The S&P 500 made a bearish divergence (weekly bar chart, RSI 14) before topping in October 2007.

March 2000 top

The S&P 500 made a long and steady bearish divergence (weekly bar chart, RSI 14) before topping in March 2000.

January 1973

The S&P 500 made a bearish divergence (weekly bar chart, RSI 14) before topping in January 1973.

December 1968

The S&P 500 DID NOT makee a bearish divergence topping in December 1968.

 

Conclusion

I don’t expect the bull market’s top to be in. Most bull market tops end with a bearish divergence. We will probably see a bearish divergence when this bull market peaks because the S&P 500’s RSI was extremely high in 2018. The S&P 500 will go higher throughout 2018 in a choppy manner. A choppy uptrend = a not extremely high RSI, which means that there will be a bearish divergence.

Leave a Comment