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Bear market bounces have very different technical characteristics from bull markets - but they can look much the same on a graph, which is why many people do not recognize a bear market bounce when they see one.  (It also does not help that until recently, it had been so long since a major bear market bounce actually happened, due to the successful enforcement of the law against recessions for so long already before the year 2000, that most people do not even have a clue that there is a need to look for one anymore.) 

After the stock market went exponential in the late 1990's/early 2000 (in response to the enforcement of the law against recessions to the maximum extent possible during good times), I knew that it had to end badly because all exponentials do. 

And the stock market did go way down during the early 2000's, but the economy did not go down with it, due to some more extreme intervention on the part of America's central bank (the intervention gets more extreme every time it is needed - which should be a hint to most people about what to expect down the road, but it isn't). 

When I was trying to figure out why the central bank was getting so extreme in its efforts to keep the economy going, I found out about the law against recessions in the summer of 2001 - and immediately realized that the central bank would keep pushing until doing so was impossible and then the entire system would crash. 

But I also knew, relative to the stock market itself, that what came out of the early 2000's downturn could not be a new bull market (in the wake of an exponential), it could only be a bear market bounce, although it would probably be a very big one in light of the central bank's continued efforts at enforcement of the law against recessions.  That is exactly what happened, we ended up with a big bear market bounce that lasted from 2003-2007.  

But that big bear market bounce was misinterpreted as a new bull market by most people, as all initial bear market bounces are because they come at the beginning of a bear market when everyone is hoping that it is, in fact, a new bull market - and it did not help that that bear market bounce actually made it to a nominal new all-time high by the time it ended, thus convincing people all the more that it was a new bull market. 

The trouble is that the market did not break out enough before it came back down, which it did very quickly, which confirmed that it was a bear market bounce, with the final confirmation coming in early 2009 when the bear market bounce was well more than fully retraced to the downside, which all bear market bounces are.  In other words, the market made it to a substantial new low at that time, thus confirming the entire upmove from 2003-2007 as a bear market bounce.  Bull markets do not go to a substantial new low, ever, during their entire run - they can't, the graphical definition of a bull market is a series of higher highs and higher lows, not lower lows. 

The upmove from 2003-2007 was indeed interpreted by most people as a new bull market - especially once it went to a new high, just before it started going down into the big downturn in 2007, which is actually a well-defined Elliott wave pattern from 2003, this time on a particularly large scale - so most people did not realize something was wrong until the market crashed in October 2008. 

That is why most people were so utterly shocked and surprised when the stock market crash hit, especially immediately in the wake of the passage of a $700 billion economic bailout package by Congress. 

But I predicted to myself, during the second week of debate on the bailout package, that the stock market would probably crash by the end of October in the wake of it, once the traders were paying enough attention to the economy again. 

Why did I predict this?  Because I was monitoring the economy on a virtually daily basis during that time and it was deteriorating very quickly on a daily basis during that time.  $700 billion MAY have been enough when debate started - but by the time debate ended after two weeks and the bailout package was passed, the economy had deteriorated too much. 

So when the Wall Street traders took their eyes off the bailout package and back onto the economy and realized how much the economy had deteriorated in the time since they had been putting most of their focus on the bailout package (they didn't want the economy to go down, either) - and especially since the bailout package was passed on a Friday, and early enough in the day so that the traders still had plenty of time to focus on the issues before the end of the trading day, which put even more emphasis on the issue from a stock-trading point of view because the traders wanted to keep what profits they had, they did not want to get nailed on Monday morning by whatever might happen over the weekend - when they turned their attention away from the bailout package once it was passed and turned their attention back to the economy, they started selling almost immediately and kept doing so for the rest of the afternoon.

I saw it happen in real-time - the market was going sideways (while the bailout package was being considered, before it passed) and then all of a sudden, the market dropped vertically. 

It kept dropping for the rest of the day - and then continued dropping the following Monday through Thursday.  When I looked at the market at the end of the day that Thursday, I realized that it had just gone down enough, fast enough, over the previous days to consider the downmove that started the previous Friday a crash. 

And that is what other people eventually noticed, too - by the following Monday, enough people had thought about it to also realize that a market crash had just happened and within just a week or two afterward, it became evident that consumer spending was crashing. 

Consumers were reacting exactly the way I expected them to once the big stock market downturn hit - just that the stock market downturn came as a crash in the end because of all the ever-more-extreme efforts to keep the economy going over the course of time, and in the end, the crash even came a little earlier than I expected it to (but I did see it coming before it happened - and early enough to have been able to warn people if anyone had been listening to me back then, which no one was because no one wanted to even hear that a crash was coming, since they had been happy with the economy for so long already and just wanted that to continue). 

The market kept going down more, although at a lesser rate, for a while longer - and then went sideways into the end of 2008 and early 2009 (which was a fourth-wave move in Elliott terminology). 

Then came the fifth wave down going into March 2009 (five waves make an impulse pattern) - which confirmed the entire move down from 2007 as an impulse pattern (an impulse pattern to the downside in this case) and that guaranteed (it was just highly likely before, given the scale that things were happening on) that what would follow would only be a(nother) bear market bounce and that would be followed by another major leg down (which has not happened yet). 

The reason why I know that the move from March 2009 is a bear market bounce is as follows.

First, it has all the characteristics of a bear market bounce and none of the characteristics of a new bull market. 

Second, it is in a position where an objective analyst would expect a bear market bounce. 

Third, it is a smaller move than the previous upmove from 2003-2007, which was also a bear market bounce, confirmed with finality in early 2009 when the market went well below the previous low (see discussion above). 

As a bear market develops (into each really big downturn during it), one should expect a series of ever-smaller downwaves (at lower and lower levels), each followed by an upwave (i.e., a bear market bounce) that is smaller than the previous upwave before it (other than the first upwave, which does not have a bear market bounce before it and is always big enough to be misinterpreted as a new bull market, as noted above, and that one was particularly large this time). 

We have had a really big bear market bounce from 2003-2007, which has now been followed by one that started in March 2009.  That one will be smaller than the first one.  We do not yet have the confirmation that it is done, and in fact the market may go higher yet.  (In fact, due to the law against recessions mentality, the Wall Street traders do everything they can to try to prevent the market from going down again and everything to make it go up more.)  

But once it is done, the market will drop a lot again and the more, and the longer, it gets held up in the meantime, the bigger the problem is going to be when the market comes back down again. 

Given what has happened so far over the years and over recent months, I already expect it will be a very major problem, resulting in mass bankruptcies. 

Why?  Because the Dow, which is the only index that most Americans follow, is holding above 10,000 - which is giving people hope. 

Of course, the traders quite intentionally got the Dow back above 10,000 again - on the basis of the idea that as long as they can keep it above that level, everything will be OK. 

But the more hope there is, and the longer that hope lasts, the bigger the problem will be because government debts around the world keep going up and the American national debt has, in fact, gone past the knee of its exponential already, so it will be impossible to recover from that. 

When did the American government debt go past the knee of its exponential?  Sometime between about March and October 2008, an far as I can tell - in other words, in the months before Obama was elected. 

The national debt is going up at a rather screamingly high rate in the meantime, due to compounding, and although it has not yet reached the vertical part of the exponential, in part due to the sheer size of the exponential, it is well past the knee of the exponential in the meantime and, no surprise to me, I see NO actual political will in Washington, D.C. to reduce the government spending/government annual deficits to the drastic point it would have to be in the meantime in order to get up back below the knee of the exponential. 

In fact, quite the opposite, both are way up, the government spending is higher than ever and the annual deficit has actually rocketed up to much higher levels than before in recent times. 

Once the knee of an exponential has been significantly passed - and the knee of the compounding of the American national debt has been significantly passed in the meantime, no later than in late 2009 - it becomes very difficult to get back below it, and if one is talking about a political situation, it is effectively impossible because there is almost never any political will to do so. 

If one is talking about a situation in nature, there is actually no way to do so because in nature, there is no mechanism for even making it happen in the first place because everything is on total automatic or on instinct. 

When dealing with an exponential, it is always absolutely best to stay below the knee - but when it comes to national deficit spending, that almost newer happens because governments almost never show the political will to do so, even for the many years before the knee actually gets reached, and that is what has happened in America.