Bearish Markets: What is a bearish market

Many traders at the moment wonder if we are in a large correction or bearish markets. Therefore I thought to analyse the markets at the moment to see if they are or not in a bear trend.

The theory say that a correction is 5 to 10% and a bearish trend is 20% or more from the last important top.

Let’s start with our (i.e. Australian) market:

ASX 200 had a top at 5995 on April last year and recently a low (so far) at 4803. That’s the limit for a 20%, so closes below 4800 would make our market a bearish market. What’s interesting though is that the big six companies that make 50% of the the index are in a bear trend as follows:

CBA: High $96.18 Low $70.15 current price $77.30

NAB: High $39.16 Low $26.38 current price $26.82

WBC: High $39.74 Low $28.86 current price $29.88

ANZ: High $37.25 Low $23.08 current price $23.40

BHP: High $39.74 Low $14.06 current price $15.20

TLS: High $6.73 Low $5.06 current price $5.55

That means that the other 50% of the index outperform these six biggest companies.

Looking overseas:

USA: S&P 500 had a high at 2134 and a recent low at 1812. Not in a bear trend as 20% would be to trade            under 1718. The Dow is within 20% too, but the Russell 2000 and the Transport index are in bear territory.

Germany: DAX had a high at 12400 and a low at 9240. It is in a bear trend, 20% is 9920.

China: China 300 had a high at 5393 and low at 2532. It is in a bear trend being under 4313 (20%).

In conclusion, seems very likely that we are in bearish markets or very close to one.