My hope for a prompt end to the stock-market correction was dashed no sooner than I had written last week's column. For the first time since the dark days of last summer, the S&P and Dow fell five days running. Nevertheless, I still very much believe this is a minor correction rather than anything more sinister. However, a couple of readers have asked me what exactly would make me change my bullish stance.
Long time no see
It's a vital question. As a trend-follower, you obviously need to get the main trend right. A lot of the time, this shouldn't be too hard. But it's damned tricky around turning-points. Last summer, I the start of a new bear market. I had set three criteria for doing so: the breach of the previous correction's lows, a turndown in the Coppock indicator, and a Dow-theory sell-signal.
I deliberately chose these criteria to be as demanding as possible. Despite my belief that the current bull market will ultimately prove to have been a spectacular interlude in a long-term bear market, I've never wanted to be one of those pundits who call the top every other week. There are a couple of famous newsletter-writers in the US who seem to do exactly that. They've been in the game many years and have doubtless built up a devoted following. But I know that IC readers wouldn't cut me nearly so much slack, and rightly so.
