Sector Investing

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History does repeat but it is not an exact science.

Bull market tops are formed with high volume and generally low but rising volatility.

Bear market bottoms are formed after an extremely high volume capitulation phase with corresponding high volatility.

Later when the actual bottom is formed it is with lower volume than the capitulation phase and still high volatility.

But generally both lower volatility and lower volume than what was seen during the higher volume capitulation phase.

Lets take the 2000 top and 2002 bottom as an example and see what we might learn looking at the market decline to date over the last few months. Could we have already seen capitulation? Maybe, but there are a few things different than in 2002. First volume has grown considerably. Second volatility has returned but not to previous heights. Third if we are already forming a bottom then we would be doing it at much higher relative strength than what we saw at the last bear market bottom. Anyway, here is the chart:



RtS