Market Downtrends
Market downtrends, which characterize major bear markets, represent period of high risk for investors who are generally well advised to avoid assuming ner positions and/or to reduce currently invested stock positions for as long as suc downtrends are in effect. Just to review the tell-tale signs and patterns of behavic associated with bearish market climates.
Market downtrends are characterized by a series of lower peaks (resistance zones) and lower areas (support zones) from which rallies emanate.
For as long as a pattern of lower lows and lower highs remains in effect, a bea market is in effect.
Resistance zones during bear markets generally develop at or slightly below peaks of previous market recoveries. Previous areas of support often become areas of current resistance.
The capability of the stock market to penetrate a previous resistance zone could be an early indication of a significant trend reversal.
As you can see, there were transitions from area in which support factors dominated (1998 to early 2000) to areas in which resistance factors dominated (2000 to 2002), a transitional period (late 2002), and then a return to an area in which support factors were dominant (2003 to 2004).