WEBVTT 00:00:00.000 --> 00:00:02.839 Okay, let's unpack this. We are diving into one 00:00:02.839 --> 00:00:06.719 of the most fundamental concepts in finance, 00:00:06.980 --> 00:00:10.820 the market trend. It's this perceived tendency 00:00:10.820 --> 00:00:13.740 of financial markets to, you know, move in a 00:00:13.740 --> 00:00:16.920 particular direction over time. What defines 00:00:16.920 --> 00:00:21.179 this powerful sweeping movement and how exactly 00:00:21.179 --> 00:00:24.379 do analysts categorize these trajectories? That 00:00:24.379 --> 00:00:26.199 really is the core question, isn't it? I mean, 00:00:26.199 --> 00:00:28.699 for anyone who wants to move beyond just, you 00:00:28.699 --> 00:00:31.239 know, watching the ticker. Right. And actually 00:00:31.239 --> 00:00:33.799 start navigating the markets. A market trend 00:00:33.799 --> 00:00:36.659 is. It's just that. It's the long arc of price 00:00:36.659 --> 00:00:39.340 action, the direction of travel, but sustained 00:00:39.340 --> 00:00:42.179 over a real period. It gives you the context 00:00:42.179 --> 00:00:44.200 for every single decision. And we're not just 00:00:44.200 --> 00:00:46.000 talking about the day -to -day noise here. little 00:00:46.000 --> 00:00:48.000 blips on the screen. Not at all. We're looking 00:00:48.000 --> 00:00:50.560 to understand the huge multi -year shifts that, 00:00:50.579 --> 00:00:52.719 you know, really define economic history. These 00:00:52.719 --> 00:00:54.740 are like the tectonic plates moving beneath the 00:00:54.740 --> 00:00:56.979 daily volatility. OK, so how do we make sense 00:00:56.979 --> 00:00:59.659 of it all? Well, structure is everything. Analysts 00:00:59.659 --> 00:01:02.280 classify these trends into three sort of nested 00:01:02.280 --> 00:01:04.560 layers based on how long they last. Three layers. 00:01:04.760 --> 00:01:08.019 Yep. You have the secular trend, which can operate 00:01:08.019 --> 00:01:10.519 over decades. Then you have the primary trend, 00:01:10.739 --> 00:01:12.700 which is what we often think of as a market cycle. 00:01:12.819 --> 00:01:15.799 And finally, the secondary trend. That's the 00:01:15.799 --> 00:01:18.659 short -term noise within the bigger cycle. The 00:01:18.659 --> 00:01:20.939 whole game of technical analysis is built on 00:01:20.939 --> 00:01:23.200 spotting these movements. You know, drawing friend 00:01:23.200 --> 00:01:26.579 lines, finding support and resistance. That sounds 00:01:26.579 --> 00:01:28.180 like a pretty elegant framework, almost like 00:01:28.180 --> 00:01:33.079 a map for the chaos. Yeah. There has to be a 00:01:33.079 --> 00:01:35.000 catch, right? A limitation that everyone needs 00:01:35.000 --> 00:01:36.780 to understand. A huge one. And it's the most 00:01:36.780 --> 00:01:39.180 critical caveat, something you, the listener, 00:01:39.280 --> 00:01:41.519 have to get right from the start. The limitation 00:01:41.519 --> 00:01:45.000 is just baked into the process. A future market 00:01:45.000 --> 00:01:48.379 trend can only, and I mean only, be definitively 00:01:48.379 --> 00:01:50.500 determined in hindsight. So all this analysis 00:01:50.500 --> 00:01:52.799 is backward looking. We have to be crystal clear 00:01:52.799 --> 00:01:55.260 on this. Market timing, predicting the future. 00:01:55.400 --> 00:01:58.140 It's a game of probabilities. It's educated guessing. 00:01:58.319 --> 00:02:01.060 It's not a crystal ball. Technical analysis lets 00:02:01.060 --> 00:02:03.620 us identify and characterize past trends with 00:02:03.620 --> 00:02:06.359 perfect clarity. So the market trend is really 00:02:06.359 --> 00:02:09.180 the ghost of price action past. We can draw the 00:02:09.180 --> 00:02:11.300 lines perfectly on the history books. Exactly. 00:02:11.699 --> 00:02:14.400 But looking forward, we're flying blind. Precisely. 00:02:14.729 --> 00:02:16.870 When we say we've identified an uptrend, all 00:02:16.870 --> 00:02:19.169 we're doing is connecting a series of higher 00:02:19.169 --> 00:02:21.270 highs and higher lows on a chart that's already 00:02:21.270 --> 00:02:23.189 been printed. For a downtrend, you know, it's 00:02:23.189 --> 00:02:25.509 lower lows and lower highs. The problem, of course, 00:02:25.650 --> 00:02:28.169 is that in the present, those trend lines are 00:02:28.169 --> 00:02:31.289 constantly being challenged or broken or redrawn. 00:02:31.729 --> 00:02:35.050 The now always feels uncertain, which is why 00:02:35.050 --> 00:02:38.969 having this... Language, secular, primary, secondary 00:02:38.969 --> 00:02:41.750 is so essential. It helps you frame where you 00:02:41.750 --> 00:02:44.050 are, even if it can't tell you where you're going 00:02:44.050 --> 00:02:46.650 tomorrow. Since we are defining the language 00:02:46.650 --> 00:02:49.210 of markets, we have to start with the most famous 00:02:49.210 --> 00:02:51.370 animals in finance. The bull and the bear. The 00:02:51.370 --> 00:02:53.289 bull and the bear. Everyone knows a bull market 00:02:53.289 --> 00:02:55.689 means prices are going up and a bear market means 00:02:55.689 --> 00:02:58.409 they're going down. But what's really fascinating 00:02:58.409 --> 00:03:01.289 here is the origin story. It's not what you'd 00:03:01.289 --> 00:03:04.439 expect. No, it's one of the great anecdotes of 00:03:04.439 --> 00:03:06.860 financial history, and it shows you just how 00:03:06.860 --> 00:03:10.740 intertwined markets and, well, society were. 00:03:11.439 --> 00:03:14.300 These terms didn't come from some academic theory. 00:03:14.419 --> 00:03:16.539 They came from the rough and tumble world of 00:03:16.539 --> 00:03:19.180 London's Exchange Alley way back in the early 00:03:19.180 --> 00:03:22.360 18th century. Exchange Alley. So this is before. 00:03:23.080 --> 00:03:25.639 A formal stock exchange even existed. This is 00:03:25.639 --> 00:03:28.360 the Wild West of trading. The absolute Wild West. 00:03:28.580 --> 00:03:30.400 And let's talk about the bear first, because 00:03:30.400 --> 00:03:32.860 that term actually came before the bull. OK. 00:03:32.979 --> 00:03:35.500 It came from a group of traders called bearskin 00:03:35.500 --> 00:03:38.819 jobbers. These were middlemen who were basically 00:03:38.819 --> 00:03:42.099 running a futures market for bearskins. But the 00:03:42.099 --> 00:03:44.620 key thing is they were doing what we would now 00:03:44.620 --> 00:03:47.159 call naked short selling. Selling something you 00:03:47.159 --> 00:03:49.219 don't actually own yet. Exactly that. They'd 00:03:49.219 --> 00:03:51.520 signed a contract to sell bearskins at a set 00:03:51.520 --> 00:03:54.419 price on a future date without having any skins. 00:03:54.800 --> 00:03:56.879 They were betting that the price of the skins 00:03:56.879 --> 00:03:59.120 would fall before they had to deliver so they 00:03:59.120 --> 00:04:01.580 could buy them cheap and, you know, pocket the 00:04:01.580 --> 00:04:03.340 difference. So they were selling the bear's skin 00:04:03.340 --> 00:04:05.539 before they'd actually caught the bear. You've 00:04:05.539 --> 00:04:08.500 got it. That's the phrase. And that idea, that 00:04:08.500 --> 00:04:11.139 act of selling first and betting on a price drop 00:04:11.139 --> 00:04:15.039 became synonymous with being a bear. A bear is 00:04:15.039 --> 00:04:17.300 pessimistic by nature. They're wagering on a 00:04:17.300 --> 00:04:19.680 decline. That is such a vivid, perfect origin 00:04:19.680 --> 00:04:22.439 for short selling. So where does the bull come 00:04:22.439 --> 00:04:25.449 in? The bull came a bit later, probably just 00:04:25.449 --> 00:04:28.730 as a natural opposite in conversation. The traders 00:04:28.730 --> 00:04:31.269 who got called bulls were the ones buying shares, 00:04:31.529 --> 00:04:34.589 often on credit, going long. They were optimistic. 00:04:34.629 --> 00:04:37.370 And the names themselves were an analogy to the. 00:04:38.040 --> 00:04:40.420 The popular sports of the time. That's the leading 00:04:40.420 --> 00:04:42.839 theory, yes. Think about it. Bear baiting and 00:04:42.839 --> 00:04:46.300 bull baiting were huge, if brutal, cultural events 00:04:46.300 --> 00:04:48.759 back then. Right. So the bull was put in opposition 00:04:48.759 --> 00:04:51.639 to the bear, not because of how it attacks, but 00:04:51.639 --> 00:04:53.779 because the two animals were famously paired 00:04:53.779 --> 00:04:56.180 against each other in the fighting pits. The 00:04:56.180 --> 00:04:58.220 terms just mirrored the two opposing sides in 00:04:58.220 --> 00:05:00.139 the market. And we actually have a record of 00:05:00.139 --> 00:05:02.300 this from the time, don't we? A description of 00:05:02.300 --> 00:05:04.420 what these traders were like? We do, and it's 00:05:04.420 --> 00:05:06.839 fantastic. A guy named Thomas Mortimer in his 00:05:06.839 --> 00:05:10.899 17... book, Every Man His Own Broker. He wrote 00:05:10.899 --> 00:05:13.860 it all down. He gives us this amazing window 00:05:13.860 --> 00:05:16.540 into the psychology. What did he say? He described 00:05:16.540 --> 00:05:19.420 the bulls, the ones who had bought too much, 00:05:19.420 --> 00:05:21.879 who were over leveraged, wandering around the 00:05:21.879 --> 00:05:25.060 offices moaning, just desperate to find someone, 00:05:25.139 --> 00:05:28.120 anyone to buy their shares. So that moment of 00:05:28.120 --> 00:05:31.300 panic when your optimism turns sour. Exactly. 00:05:31.540 --> 00:05:33.500 And then he described the bears, the short sellers, 00:05:33.639 --> 00:05:36.360 as rushing frantically around the alley, trying 00:05:36.360 --> 00:05:38.420 to buy up any shares they could find to close 00:05:38.420 --> 00:05:40.839 out their positions. He literally says they were 00:05:40.839 --> 00:05:44.060 devouring any shares they could find. Wow. It's 00:05:44.060 --> 00:05:46.399 the perfect contrast, right? The bull is suffering 00:05:46.399 --> 00:05:48.699 from too much greed and the bear is suffering 00:05:48.699 --> 00:05:51.379 from intense fear. That is so much richer than 00:05:51.379 --> 00:05:53.300 the simple story you always hear. Oh, the folk 00:05:53.300 --> 00:05:55.100 etymology. Yeah, we should probably debunk that 00:05:55.100 --> 00:05:57.220 quickly. The idea that a bear swipes his claws 00:05:57.220 --> 00:05:59.560 down and a bill thrusts its horns up? That's 00:05:59.560 --> 00:06:01.920 the one. It's a charming story, but it's completely 00:06:01.920 --> 00:06:05.519 unrelated. The sources are clear. The real origin 00:06:05.519 --> 00:06:08.519 is in those 18th century market practices. It's 00:06:08.519 --> 00:06:10.759 a good reminder that, you know, this jargon has 00:06:10.759 --> 00:06:14.180 a very human, very visceral history. Okay, now 00:06:14.180 --> 00:06:15.800 that we have the language, let's get into the 00:06:15.800 --> 00:06:18.379 geography of market time. You talked about the 00:06:18.379 --> 00:06:21.199 ocean. Yes. If you imagine the market as this 00:06:21.199 --> 00:06:23.740 huge ocean, you have to understand the tides, 00:06:23.759 --> 00:06:26.120 the waves, and the little ripples all at the 00:06:26.120 --> 00:06:29.500 same time. As we said, structure is key. And 00:06:29.500 --> 00:06:31.759 that means breaking it down into those three 00:06:31.759 --> 00:06:34.360 nested layers. Let's start with the biggest one, 00:06:34.399 --> 00:06:37.060 the one that feels almost... Geological, the 00:06:37.060 --> 00:06:39.560 secular trend. Secular trends are the really 00:06:39.560 --> 00:06:42.160 profound long -term movements. We're talking 00:06:42.160 --> 00:06:45.240 massive timeframes, anywhere from five to 25 00:06:45.240 --> 00:06:47.560 years, sometimes even longer. Wow. These are 00:06:47.560 --> 00:06:49.899 the mega trends. They're driven by huge structural 00:06:49.899 --> 00:06:53.379 shifts, demographic changes, massive new technologies. 00:06:53.480 --> 00:06:55.459 Think about the invention of the internet or 00:06:55.459 --> 00:06:57.699 the baby boomers entering the workforce. Those 00:06:57.699 --> 00:07:00.680 things create secular trends. So if the market 00:07:00.680 --> 00:07:03.459 goes up for, say, 15 years, that's a secular 00:07:03.459 --> 00:07:05.579 bull market. But you said it's not just... a 00:07:05.579 --> 00:07:07.959 straight lineup. That's the critical part to 00:07:07.959 --> 00:07:10.779 understand. A secular trend is defined by its 00:07:10.779 --> 00:07:13.959 net direction over that long period. So a secular 00:07:13.959 --> 00:07:16.339 bull market has this prevailing upward movement. 00:07:16.459 --> 00:07:19.540 But inside that two decade climb, you will absolutely 00:07:19.540 --> 00:07:22.939 have several multi -year primary bull markets 00:07:22.939 --> 00:07:25.959 interrupted by some very painful primary bear 00:07:25.959 --> 00:07:28.839 markets. It's a long term upward journey, but 00:07:28.839 --> 00:07:30.980 one that is constantly testing your resolve as 00:07:30.980 --> 00:07:33.250 an investor. It sounds like the market rewards 00:07:33.250 --> 00:07:36.860 patients on a massive scale. But only if you 00:07:36.860 --> 00:07:38.819 can stomach some serious downturns along the 00:07:38.819 --> 00:07:41.180 way. Give us some solid examples. Absolutely. 00:07:41.279 --> 00:07:43.180 The classic example of a secular bull in the 00:07:43.180 --> 00:07:45.660 U .S. is a period from about 1983 all the way 00:07:45.660 --> 00:07:48.500 to the year 2000. The dot -com boom. Right. And 00:07:48.500 --> 00:07:51.259 you could argue it extended to 2007 in some sectors. 00:07:51.319 --> 00:07:54.480 It was this long, powerful climb driven by falling 00:07:54.480 --> 00:07:57.019 interest rates, the rise of personal computing, 00:07:57.139 --> 00:07:59.980 globalization. And even with sharp shocks like 00:07:59.980 --> 00:08:02.819 Black Monday in 87, the overall direction just 00:08:02.819 --> 00:08:05.279 kept going up. Another great example was the 00:08:05.279 --> 00:08:07.579 commodities boom in the 2000s, driven almost 00:08:07.579 --> 00:08:10.279 entirely by the explosive growth in China. And 00:08:10.279 --> 00:08:12.279 on the other side of the coin, the secular bear 00:08:12.279 --> 00:08:14.500 market. Yeah. That must be where investors just 00:08:14.500 --> 00:08:18.329 lose all hope over time. It's a slow, grinding 00:08:18.329 --> 00:08:21.310 death for optimism. That's when the prevailing 00:08:21.310 --> 00:08:23.730 trend is down. And it's made up of these smaller, 00:08:23.829 --> 00:08:26.529 deceptive bull rallies that give you false hope. 00:08:26.649 --> 00:08:29.829 Right. And then much larger, more severe bear 00:08:29.829 --> 00:08:32.629 markets that crush that hope. The textbook case 00:08:32.629 --> 00:08:35.750 is the U .S. stock market from 1929 to 1949. 00:08:36.269 --> 00:08:39.210 20 years. 20 years. After the Wall Street crash, 00:08:39.450 --> 00:08:41.710 the market was just brutalized by the Great Depression. 00:08:41.909 --> 00:08:45.519 The overall movement was just... flat to negative 00:08:45.519 --> 00:08:47.980 for an entire generation. That kind of experience 00:08:47.980 --> 00:08:50.240 must have scarred people for life financially. 00:08:50.539 --> 00:08:52.799 It absolutely did. It created a decades long 00:08:52.799 --> 00:08:55.700 bias towards safe assets like bonds. And another 00:08:55.700 --> 00:08:58.100 powerful example just to show it's not only stocks 00:08:58.100 --> 00:09:01.620 is gold. It had a massive secular bear market. 00:09:01.740 --> 00:09:04.840 It peaked at around $850 an ounce in January 00:09:04.840 --> 00:09:07.980 1980, driven by inflation fears. I remember that. 00:09:08.100 --> 00:09:11.759 And then it just declined. relentlessly for almost 00:09:11.759 --> 00:09:15.259 20 years. It finally bottomed out in June 1999 00:09:15.259 --> 00:09:20.019 at just $253 an ounce. That moment is famously 00:09:20.019 --> 00:09:22.860 known as the brown bottom. That's a 19 -year 00:09:22.860 --> 00:09:25.399 downward spiral. Okay, so zooming in from that 00:09:25.399 --> 00:09:28.379 25 -year view, we get to the primary trend. This 00:09:28.379 --> 00:09:29.960 is what people usually mean when they say market 00:09:29.960 --> 00:09:32.399 cycle, right? That's exactly right. A primary 00:09:32.399 --> 00:09:34.539 trend is that medium -term engine. It typically 00:09:34.539 --> 00:09:36.940 lasts for a year or more, maybe as long as... 00:09:37.419 --> 00:09:40.000 five or 10 years in some cases. The key thing 00:09:40.000 --> 00:09:42.240 here is that the movement has to be broad. It 00:09:42.240 --> 00:09:44.820 can't just be one hot sector. It has to have 00:09:44.820 --> 00:09:47.620 support across the entire market reflecting the 00:09:47.620 --> 00:09:50.539 underlying health of the whole economy. So this 00:09:50.539 --> 00:09:53.399 is the level that really drives most. Investment 00:09:53.399 --> 00:09:55.340 decisions, retirement planning, all of that. 00:09:55.519 --> 00:09:57.720 Precisely. It defines whether we're in a cyclical 00:09:57.720 --> 00:10:00.059 bull, which is a sustained rise, or a cyclical 00:10:00.059 --> 00:10:03.059 bear, a sustained decline. And the sum of all 00:10:03.059 --> 00:10:05.279 these primary trends is what creates that big 00:10:05.279 --> 00:10:07.139 secular trend we just talked about. Which brings 00:10:07.139 --> 00:10:09.700 us to the final layer, the ripples on the surface, 00:10:09.879 --> 00:10:12.840 the short -term noise. The secondary trends, 00:10:13.080 --> 00:10:15.259 these are the short term changes in direction 00:10:15.259 --> 00:10:17.899 that happen inside a bigger primary trend. It 00:10:17.899 --> 00:10:20.039 could be a reaction to an earnings report, a 00:10:20.039 --> 00:10:22.659 geopolitical flare up, a central bank comment. 00:10:22.799 --> 00:10:25.500 Right. They last a few weeks, maybe a couple 00:10:25.500 --> 00:10:28.340 of months. They are the definition of volatility. 00:10:28.820 --> 00:10:31.039 And the lesson for an investor there seems to 00:10:31.039 --> 00:10:34.039 be learn to ignore them. They're designed to 00:10:34.039 --> 00:10:36.360 shake you out, but they don't matter if the main 00:10:36.360 --> 00:10:39.299 primary trend is still intact. That is the so 00:10:39.299 --> 00:10:41.340 what of it. A secondary trend is like a stress 00:10:41.340 --> 00:10:44.519 test. It shakes out the weak hands, the investors 00:10:44.519 --> 00:10:47.279 who panic easily before the primary trend can 00:10:47.279 --> 00:10:49.639 get going again. These little corrections and 00:10:49.639 --> 00:10:52.179 rallies are a necessary part of any big move 00:10:52.179 --> 00:10:54.980 up or down. OK, let's focus now on those two 00:10:54.980 --> 00:10:57.720 major states of the primary trend, bull and the 00:10:57.720 --> 00:11:00.240 bear. We need to get into the precise technical 00:11:00.240 --> 00:11:02.620 rules here because the line between a healthy 00:11:02.620 --> 00:11:05.200 market and a full blown panic seems pretty thin. 00:11:05.419 --> 00:11:07.399 And it is. Knowing the thresholds is crucial. 00:11:07.879 --> 00:11:09.580 But beyond the numbers, the most important thing 00:11:09.580 --> 00:11:11.980 is the huge psychological shift that defines 00:11:11.980 --> 00:11:14.440 these two periods. It's the difference between, 00:11:14.460 --> 00:11:17.320 you know, optimism and utter despair ruling the 00:11:17.320 --> 00:11:19.960 day. Let's start with the bull, a period of rising 00:11:19.960 --> 00:11:23.299 prices. But what's the technical trigger? When 00:11:23.299 --> 00:11:27.080 is a bull market officially declared? The globally 00:11:27.080 --> 00:11:29.580 accepted definition is that a primary bull market 00:11:29.580 --> 00:11:32.519 officially begins when stocks rise 20 percent 00:11:32.519 --> 00:11:35.019 from their previous low. 20 percent. That 20 00:11:35.019 --> 00:11:37.320 percent surge from the bottom signals a really 00:11:37.320 --> 00:11:40.740 substantial sustained shift in momentum. And 00:11:40.740 --> 00:11:42.940 conversely, the bull market is declared over 00:11:42.940 --> 00:11:45.279 when stocks fall by 20 percent from their peak. 00:11:45.500 --> 00:11:47.460 So that 20 percent rule is the key. It's the 00:11:47.460 --> 00:11:50.379 line in the sand. Now, the source material had 00:11:50.379 --> 00:11:52.799 a really interesting little nuance here, saying 00:11:52.799 --> 00:11:55.460 a bull market might not be a true bull market 00:11:55.460 --> 00:11:58.340 if it's happening inside a huge secular bear. 00:11:58.480 --> 00:12:00.919 Can you explain that? Yeah, that's a more advanced 00:12:00.919 --> 00:12:03.899 but important point for analysts. Some strict 00:12:03.899 --> 00:12:06.320 cycle theorists would argue that a 20 % rally 00:12:06.320 --> 00:12:09.120 is just that, a secular rally, if the long -term 00:12:09.120 --> 00:12:11.340 drivers, you know, demographics, interest rates, 00:12:11.419 --> 00:12:13.580 if those are still negative. I see. In their 00:12:13.580 --> 00:12:16.159 view, a true primary bull needs all the big forces 00:12:16.159 --> 00:12:18.799 aligned. But for most everyday financial reporting, 00:12:19.019 --> 00:12:21.539 that 20 % rule is the benchmark. OK, now, the 00:12:21.539 --> 00:12:23.980 psychology of this is fascinating. It's totally 00:12:23.980 --> 00:12:26.179 counterintuitive. The start of a bull market 00:12:26.179 --> 00:12:29.480 isn't happy. It's gloomy. It is the ultimate 00:12:29.480 --> 00:12:32.980 contrarian signal. A bull market starts in widespread 00:12:32.980 --> 00:12:36.240 pessimism. It begins at the exact moment the 00:12:36.240 --> 00:12:39.179 crowd is most bearish, when fear and disgust 00:12:39.179 --> 00:12:41.870 are at their peak. And then it evolves. It evolves 00:12:41.870 --> 00:12:44.590 through these predictable stages. It goes from 00:12:44.590 --> 00:12:48.230 deep despondency to cautious hope, then to widespread 00:12:48.230 --> 00:12:51.789 optimism. And it finally ends in pure unchecked 00:12:51.789 --> 00:12:53.809 euphoria right before the whole thing breaks. 00:12:54.009 --> 00:12:56.190 And this psychological wave often happens before 00:12:56.190 --> 00:12:59.269 the real economy gets better. The market is like 00:12:59.269 --> 00:13:01.309 a leading indicator. It is a leading indicator. 00:13:01.549 --> 00:13:03.490 It often starts its recovery while unemployment 00:13:03.490 --> 00:13:05.870 is still high and the economy is in recession. 00:13:06.210 --> 00:13:08.730 It shows you the market trades on future expectations, 00:13:08.929 --> 00:13:11.350 not the present reality. The so -called smart 00:13:11.350 --> 00:13:13.370 money gets in when the headlines are still awful. 00:13:13.509 --> 00:13:16.070 The historical data on this is pretty incredible. 00:13:16.269 --> 00:13:18.210 It's staggering. If you look at the data from, 00:13:18.289 --> 00:13:22.570 say, 1926 to 2014, the average duration of a 00:13:22.570 --> 00:13:24.570 bull market was eight and a half years. Eight 00:13:24.570 --> 00:13:27.899 and a half years. Think about that. And the reward 00:13:27.899 --> 00:13:30.039 for staying the course, the average cumulative 00:13:30.039 --> 00:13:35.399 return was an astonishing 458%. 458%. That's 00:13:35.399 --> 00:13:37.000 how generational wealth is built right there. 00:13:37.100 --> 00:13:39.639 That's the engine. And the annualized gains were 00:13:39.639 --> 00:13:43.440 also huge, ranging from about 15 % up to 34 % 00:13:43.440 --> 00:13:45.919 a year. We're talking about periods like the 00:13:45.919 --> 00:13:49.080 post -war boom or the mid -90s tech revolution. 00:13:49.460 --> 00:13:51.320 And this isn't just a U .S. or Western thing. 00:13:51.440 --> 00:13:54.519 Not at all. A great global example is India's 00:13:54.519 --> 00:13:58.519 SENSEX index. In April 2003 and January 2008, 00:13:58.899 --> 00:14:02.620 it went on an epic bull run. In that five -year 00:14:02.620 --> 00:14:05.179 window, the index went from around 2 ,900 points 00:14:05.179 --> 00:14:08.860 to over 21 ,000. That's a return of over 600%. 00:14:08.860 --> 00:14:11.340 It just shows you the raw power a bull market 00:14:11.340 --> 00:14:13.460 can unleash. Okay, now for the dark side, the 00:14:13.460 --> 00:14:15.970 bear market. This is that terrifying transition 00:14:15.970 --> 00:14:19.629 from euphoria into fear and panic. It's a complete 00:14:19.629 --> 00:14:21.809 reversal of confidence. And technically, it's 00:14:21.809 --> 00:14:24.110 defined as a general decline of 20 % or more 00:14:24.110 --> 00:14:26.169 from the peak, lasting at least two months. That 00:14:26.169 --> 00:14:28.230 duration is important. It means it's not just 00:14:28.230 --> 00:14:30.269 a flash crash. And we have to distinguish this 00:14:30.269 --> 00:14:32.840 from a correction. Absolutely. A drop of 10 % 00:14:32.840 --> 00:14:36.779 to just under 20 % is a market correction. Corrections 00:14:36.779 --> 00:14:38.899 can feel scary, but they're generally seen as 00:14:38.899 --> 00:14:42.080 healthy. They shake out the speculation. A full 00:14:42.080 --> 00:14:45.320 primary bear market is that deeper, more sustained 00:14:45.320 --> 00:14:49.620 20 % drop. And what about this idea of bear territory? 00:14:50.080 --> 00:14:52.519 That sounds like the phase where the danger is 00:14:52.519 --> 00:14:55.100 clear, but the official call hasn't been made 00:14:55.100 --> 00:14:57.409 yet. That's a great way to put it. Bare territory 00:14:57.409 --> 00:15:00.509 is the prelude. It's when the market might still 00:15:00.509 --> 00:15:02.750 technically be in a correction, but all the warning 00:15:02.750 --> 00:15:04.870 lights are flashing red. Like what? You see the 00:15:04.870 --> 00:15:07.950 VIX, the fear index just skyrocket. Consumer 00:15:07.950 --> 00:15:11.129 sentiment starts to plummet. Businesses get pessimistic. 00:15:11.490 --> 00:15:13.990 Unemployment expectations start rising. The whole 00:15:13.990 --> 00:15:16.909 economic outlook just sours fast. And this can 00:15:16.909 --> 00:15:19.129 often be triggered by, say, policy uncertainty 00:15:19.129 --> 00:15:21.299 without getting into the politics of it. Yes, 00:15:21.440 --> 00:15:23.580 the source material notes that major policy shifts, 00:15:23.720 --> 00:15:25.860 things like sudden tariff changes or unexpected 00:15:25.860 --> 00:15:28.840 interest rate moves, can absolutely push a market 00:15:28.840 --> 00:15:31.320 into bear territory. The key thing to know is 00:15:31.320 --> 00:15:33.580 that when a market enters bear territory, it 00:15:33.580 --> 00:15:35.720 very often leads to the full -blown bear market 00:15:35.720 --> 00:15:38.080 confirmation. So how do we know when the pain 00:15:38.080 --> 00:15:40.980 is finally over? Well, technically, a bear market 00:15:40.980 --> 00:15:43.299 is over when the market not only recovers but 00:15:43.299 --> 00:15:46.379 makes a new all -time high. But the more common 00:15:46.379 --> 00:15:50.639 signal is, again, that 20 % rule. When Texas 00:15:50.639 --> 00:15:53.659 gained 20 % or more from their absolute lowest 00:15:53.659 --> 00:15:56.059 point, the bear is considered to be over. The 00:15:56.059 --> 00:15:59.019 20 % rule is the way in and the way out. It's 00:15:59.019 --> 00:16:01.600 the gatekeeper. And look, bear markets are much 00:16:01.600 --> 00:16:04.460 shorter, but they are incredibly intense. The 00:16:04.460 --> 00:16:08.259 data from that same 1926 to 2014 period shows 00:16:08.259 --> 00:16:11.120 the average bear market lasted just 13 months. 00:16:11.360 --> 00:16:13.879 Only 13 months. But the average cumulative loss 00:16:13.879 --> 00:16:17.690 in that short time was a crushing 30%. Wow. So 00:16:17.690 --> 00:16:19.990 in just over a year, you could lose a third of 00:16:19.990 --> 00:16:22.529 your portfolio. That speed explains the panic. 00:16:22.710 --> 00:16:24.990 It really does. The annualized losses could be 00:16:24.990 --> 00:16:27.750 anywhere from nearly 20 % to a gut -wrenching 00:16:27.750 --> 00:16:30.350 47%. And the examples are burned into our financial 00:16:30.350 --> 00:16:32.870 memory, right? The 29 crash, which wiped out 00:16:32.870 --> 00:16:36.379 89 % of the Dow. 89%. The long grinding bear 00:16:36.379 --> 00:16:40.179 market of the 1970s with the energy crisis and 00:16:40.179 --> 00:16:42.720 of course the 2008 financial crisis and the more 00:16:42.720 --> 00:16:45.639 recent 2022 decline driven by inflation and weight 00:16:45.639 --> 00:16:49.220 hikes. They are incredibly destructive. OK, so 00:16:49.220 --> 00:16:51.500 we've defined the trends. Now we get to the really 00:16:51.500 --> 00:16:54.779 hard part. trying to spot the turning points. 00:16:55.139 --> 00:16:57.820 This is what every investor dreams of doing, 00:16:57.919 --> 00:17:00.899 but almost nobody gets it right. It's the impossible 00:17:00.899 --> 00:17:03.759 art of market analysis. These inflection points, 00:17:03.840 --> 00:17:06.039 the tops and the bottoms, they are only truly 00:17:06.039 --> 00:17:08.339 clear in hindsight. They're just fraught with 00:17:08.339 --> 00:17:11.339 peril. Our sources say a market top usually isn't 00:17:11.339 --> 00:17:14.160 some big dramatic single day event. That feels 00:17:14.160 --> 00:17:16.519 wrong given the chaos that comes after. It is 00:17:16.519 --> 00:17:18.099 a bit counterintuitive, but it's one of the great 00:17:18.099 --> 00:17:20.390 lessons. The market just... reaches its highest 00:17:20.390 --> 00:17:22.569 point for a while. But the recognition of that 00:17:22.569 --> 00:17:25.190 is almost entirely retrospective. Why? Because 00:17:25.190 --> 00:17:27.250 when the peak actually happens, the euphoria 00:17:27.250 --> 00:17:29.869 is usually still at a maximum. No one believes 00:17:29.869 --> 00:17:32.670 the party is over. Then prices start to drift 00:17:32.670 --> 00:17:34.930 down, sometimes slowly, sometimes very quickly. 00:17:35.130 --> 00:17:37.069 Are there any technical signs that the smart 00:17:37.069 --> 00:17:39.609 money might use to get out before the crash really 00:17:39.609 --> 00:17:42.769 accelerates? Yes. This is what technical analysis, 00:17:43.109 --> 00:17:45.450 especially the work of people like William O 00:17:45.450 --> 00:17:49.660 'Neill, comes in going back to the 1950s he identified 00:17:49.660 --> 00:17:52.299 that a market top is often characterized by an 00:17:52.299 --> 00:17:55.400 accumulation of distribution days distribution 00:17:55.400 --> 00:17:58.599 days okay that's a key term what is that a distribution 00:17:58.599 --> 00:18:02.420 day is a trading day where a major index like 00:18:02.420 --> 00:18:05.279 the s p 500 closes lower than the day before 00:18:05.279 --> 00:18:08.700 but on higher trading volume higher volume on 00:18:08.700 --> 00:18:11.640 a down day exactly the high volume suggests that 00:18:11.869 --> 00:18:14.849 Big players, institutions, are actively selling 00:18:14.849 --> 00:18:16.730 or distributing their shares to the general public 00:18:16.730 --> 00:18:19.170 who are still enthusiastically buying the dip. 00:18:19.410 --> 00:18:21.349 So the pros are quietly heading for the exits 00:18:21.349 --> 00:18:23.890 while the retail crowd is still rushing in. That's 00:18:23.890 --> 00:18:26.490 the signal. It's a silent warning bell. The rule 00:18:26.490 --> 00:18:28.250 of thumb is that if you see three to five of 00:18:28.250 --> 00:18:30.349 these distribution days in a major index within 00:18:30.349 --> 00:18:32.869 a short period, it's a strong sign that a top 00:18:32.869 --> 00:18:35.769 is being formed. Institutional support is just 00:18:35.769 --> 00:18:39.460 evaporating. Can you give an example? Sure. The 00:18:39.460 --> 00:18:41.319 peak of the dot -com bubble, the Nasdaq -100, 00:18:41.660 --> 00:18:45.220 peaked on March 24, 2000. But in the weeks leading 00:18:45.220 --> 00:18:47.420 up to that, there were clear distribution days. 00:18:47.819 --> 00:18:50.279 The same thing happened before the 2008 crisis. 00:18:50.579 --> 00:18:53.940 The S &P 500 peaked on October 9, 2007, again 00:18:53.940 --> 00:18:56.380 after a period of clear institutional selling. 00:18:56.500 --> 00:18:59.180 Okay, so now the mirror image. The market bottom. 00:18:59.339 --> 00:19:01.019 This is the end of the downturn, the start of 00:19:01.019 --> 00:19:03.640 a new bull. It's the most profitable time to 00:19:03.640 --> 00:19:06.900 buy and also the most terrifying. And trying 00:19:06.900 --> 00:19:09.160 to pinpoint that exact moment, what's called 00:19:09.160 --> 00:19:12.079 bottom picking, is famously difficult. The danger 00:19:12.079 --> 00:19:15.259 is a false signal. A false bottom. Right. You 00:19:15.259 --> 00:19:17.019 buy in, the market bounces for a couple of days, 00:19:17.079 --> 00:19:19.400 you think you're a genius, and then it resumes 00:19:19.400 --> 00:19:21.420 its plunge and you're stuck with even bigger 00:19:21.420 --> 00:19:23.599 losses. This is where that famous contrarian 00:19:23.599 --> 00:19:26.329 quote comes in. Baron Rothschild. The wisdom 00:19:26.329 --> 00:19:28.589 is that the best time to buy is when there is 00:19:28.589 --> 00:19:30.970 blood in the streets. Meaning? Meaning you buy 00:19:30.970 --> 00:19:33.529 not just when prices are low, but when sentiment 00:19:33.529 --> 00:19:36.509 is at its absolute worst. When there is panic, 00:19:36.569 --> 00:19:38.589 when there is fear everywhere, you're buying 00:19:38.589 --> 00:19:40.869 the fear, not the valuation. And the history 00:19:40.869 --> 00:19:43.250 of market bottoms really backs that up. It does. 00:19:43.430 --> 00:19:47.349 Think of Black Monday in 1987. The Dow bottomed 00:19:47.349 --> 00:19:50.779 out after a historic one -day crash. That was 00:19:50.779 --> 00:19:53.440 pure fear. Or the bottom after the dot -com bust 00:19:53.440 --> 00:19:56.619 in October 2002. The tech -heavy Nasdaq fell 00:19:56.619 --> 00:20:00.059 almost 79 % from its peak. 79 %? That's just 00:20:00.059 --> 00:20:02.960 a wipeout. It's a total wipeout. It shows what 00:20:02.960 --> 00:20:05.819 happens when a real bubble bursts. And more recently, 00:20:05.980 --> 00:20:08.420 the bottom after the 2008 crisis was in March 00:20:08.420 --> 00:20:11.910 2009. In all these cases, the bottom was only 00:20:11.910 --> 00:20:14.589 clear once that 20 % rebound started and actually 00:20:14.589 --> 00:20:17.470 held, confirming that the fear had finally burned 00:20:17.470 --> 00:20:19.970 itself out. Now, before we move on, we have to 00:20:19.970 --> 00:20:22.650 talk about the most deceptive trap of all, the 00:20:22.650 --> 00:20:24.730 false signal that tricks people into getting 00:20:24.730 --> 00:20:27.789 back in too early. Ah, yes, the bear market rally. 00:20:27.970 --> 00:20:30.730 This is a short -term price jump of, say, 5 % 00:20:30.730 --> 00:20:32.970 or more that happens before prices start falling 00:20:32.970 --> 00:20:35.210 again. It is an incredibly dangerous trap for 00:20:35.210 --> 00:20:37.329 investors. It sounds kind of harmless, but the 00:20:37.329 --> 00:20:39.779 other names for it are a lot more vivid. They 00:20:39.779 --> 00:20:41.640 definitely capture the pain. It's often called 00:20:41.640 --> 00:20:43.759 a sucker's rally or the most famous one, the 00:20:43.759 --> 00:20:46.619 dead cat bounce. The grim logic being that even 00:20:46.619 --> 00:20:48.619 a dead cat will bounce if you drop it from a 00:20:48.619 --> 00:20:51.960 great enough height. A dark but very clear analogy 00:20:51.960 --> 00:20:55.279 for a market that has a brief recovery before 00:20:55.279 --> 00:20:57.680 plunging even further. We saw them all the time 00:20:57.680 --> 00:21:00.420 during the Great Depression. After the 29 crash, 00:21:00.740 --> 00:21:03.400 there were several rallies of more than 10 percent 00:21:03.400 --> 00:21:06.019 that sucked investors back in right before the 00:21:06.019 --> 00:21:08.420 market collapsed toward its true bottom in 32. 00:21:09.480 --> 00:21:12.900 Another classic case is Japan's Nikkei 225 index. 00:21:13.539 --> 00:21:16.000 Throughout its long two -decade downturn from 00:21:16.000 --> 00:21:18.259 the late 80s, it had numerous powerful, sharp 00:21:18.259 --> 00:21:21.279 rallies that all ultimately failed. This is why 00:21:21.279 --> 00:21:23.980 bottom -picking is so risky. These rallies look 00:21:23.980 --> 00:21:26.519 and feel like the real thing. Okay, here's where 00:21:26.519 --> 00:21:29.299 it gets really interesting for me. We've mapped 00:21:29.299 --> 00:21:31.299 the what and the when. Now let's get to the why. 00:21:31.480 --> 00:21:33.880 We're moving beyond the charts and into the human 00:21:33.880 --> 00:21:36.079 element, right? Supply and demand. This is the 00:21:36.079 --> 00:21:38.359 critical pivot. At the end of the day, prices 00:21:38.359 --> 00:21:40.660 don't move because of lines on a chart. They 00:21:40.660 --> 00:21:43.400 move because of human decisions. If you can understand 00:21:43.400 --> 00:21:45.940 the behavior, you can understand the trend. Let's 00:21:45.940 --> 00:21:47.819 start with the basic mechanics. The price of 00:21:47.819 --> 00:21:49.940 anything is set by supply and demand. But there's 00:21:49.940 --> 00:21:51.960 a huge myth here we need to bust right away. 00:21:52.200 --> 00:21:54.940 Yes. You always hear it on the news. The market 00:21:54.940 --> 00:21:56.599 went up today because there were more buyers 00:21:56.599 --> 00:21:59.359 than sellers. Right. That statement is mathematically 00:21:59.359 --> 00:22:02.759 impossible. By definition, the market always 00:22:02.759 --> 00:22:05.859 balances. For every single transaction, there 00:22:05.859 --> 00:22:09.039 has to be one buyer and one seller. So if the 00:22:09.039 --> 00:22:11.619 number of buyers always equals the number of 00:22:11.619 --> 00:22:14.500 sellers, how does the price ever move? It's not 00:22:14.500 --> 00:22:17.019 about the number of people. It's about the intensity 00:22:17.019 --> 00:22:19.500 of their desire. Think of it like an auction. 00:22:19.759 --> 00:22:21.819 You have a line of sellers with their asking 00:22:21.819 --> 00:22:24.480 prices and a line of buyers with their bidding 00:22:24.480 --> 00:22:27.849 prices. When demand surges, it means the buyers 00:22:27.849 --> 00:22:30.369 get aggressive. They're willing to pay the higher 00:22:30.369 --> 00:22:32.890 asking prices of the sellers. That's what moves 00:22:32.890 --> 00:22:35.569 the price up. When supply surges, the sellers 00:22:35.569 --> 00:22:37.829 get desperate and they're willing to accept the 00:22:37.829 --> 00:22:40.250 lower bids from the buyers. That moves the price 00:22:40.250 --> 00:22:42.569 down. So it's not the quantity of people, it's 00:22:42.569 --> 00:22:44.869 the aggression of their bids and offers. It's 00:22:44.869 --> 00:22:47.720 about who's more motivated. Exactly. And this 00:22:47.720 --> 00:22:49.980 is constantly being affected by big money moving 00:22:49.980 --> 00:22:53.240 around. Imagine a huge pension fund decides to 00:22:53.240 --> 00:22:56.220 sell government bonds and buy tech stocks. They 00:22:56.220 --> 00:22:58.720 are simultaneously creating a huge supply of 00:22:58.720 --> 00:23:02.359 bonds and a huge demand for stocks. That single 00:23:02.359 --> 00:23:05.200 act pushes the price of bonds down and the price 00:23:05.200 --> 00:23:08.400 of tech stocks up. Which brings us to the core 00:23:08.400 --> 00:23:12.619 of investor behavior. Ideally, everyone wants 00:23:12.619 --> 00:23:15.539 to buy low and sell high. But in reality, driven 00:23:15.539 --> 00:23:18.380 by emotion, people do the exact opposite. They 00:23:18.380 --> 00:23:21.880 buy high, near the top, driven by greed and FOMO 00:23:21.880 --> 00:23:24.279 fear of missing out, and they sell low, near 00:23:24.279 --> 00:23:26.759 the bottom, driven by pure panic. And this is 00:23:26.759 --> 00:23:29.400 why the contrarian strategy even exists. It's 00:23:29.400 --> 00:23:31.509 the whole basis for it. Contrarian investors 00:23:31.509 --> 00:23:34.990 try to fade that emotional herd behavior. They 00:23:34.990 --> 00:23:37.029 are buying when everyone else is terrified and 00:23:37.029 --> 00:23:38.549 selling. That's what's called the accumulation 00:23:38.549 --> 00:23:41.450 phase. Correct. And they are selling or distributing 00:23:41.450 --> 00:23:44.609 their shares when the euphoric crowd is clamoring 00:23:44.609 --> 00:23:46.849 to buy at the top. And this leads to a really 00:23:46.849 --> 00:23:49.369 critical idea from behavioral economics, how 00:23:49.369 --> 00:23:51.670 this herding instinct actually breaks the normal 00:23:51.670 --> 00:23:55.130 rules of supply and demand. Yes. Standard economic 00:23:55.130 --> 00:23:57.349 theory assumes what's called a negative feedback 00:23:57.349 --> 00:23:59.930 loop. If a price goes down, demand should go 00:23:59.930 --> 00:24:01.970 up because it's a bargain and supply should go 00:24:01.970 --> 00:24:04.349 down because nobody wants to sell cheap. This 00:24:04.349 --> 00:24:07.210 stabilizes prices. But in the stock market, that 00:24:07.210 --> 00:24:09.829 often gets flipped on its head. A price increase 00:24:09.829 --> 00:24:12.049 can lead to an increase in demand. That's the 00:24:12.049 --> 00:24:15.190 euphoria, everyone piling in. And a price decrease 00:24:15.190 --> 00:24:17.970 can lead to an increase in supply. That's the 00:24:17.970 --> 00:24:21.150 panic selling. So that's the mechanism that creates 00:24:21.150 --> 00:24:24.230 bubbles and crashes. It is the mechanism. When 00:24:24.230 --> 00:24:26.890 that negative feedback loop breaks, the system 00:24:26.890 --> 00:24:29.769 becomes unstable. It feeds on its own momentum, 00:24:29.849 --> 00:24:32.509 its own emotion, until it finally exhausts itself 00:24:32.509 --> 00:24:35.569 or just violently snaps. The economist David 00:24:35.569 --> 00:24:38.029 Hirschleifer put it perfectly. He said trends 00:24:38.029 --> 00:24:40.369 move from investor underreaction to new information, 00:24:40.630 --> 00:24:43.430 and they end with massive overreaction. So if 00:24:43.430 --> 00:24:45.829 emotion is the driver, how on earth do you measure 00:24:45.829 --> 00:24:48.170 it? How do you measure the mood of millions of 00:24:48.170 --> 00:24:50.490 people? You use proxies. You look for data that 00:24:50.490 --> 00:24:52.990 quantifies the behavior of the herd. And market 00:24:52.990 --> 00:24:55.809 sentiment is an incredibly powerful contrarian 00:24:55.809 --> 00:24:58.349 indicator, especially at the extremes. So when 00:24:58.349 --> 00:25:01.170 everyone is terrified, the blood in the streets, 00:25:01.329 --> 00:25:04.150 that's a buy signal. That's the theory. When 00:25:04.150 --> 00:25:06.190 an extremely high percentage of investors are 00:25:06.190 --> 00:25:08.789 bearish, it's a strong sign that a market bottom 00:25:08.789 --> 00:25:11.509 is probably close. And there are several tools 00:25:11.509 --> 00:25:13.849 we use to track this. What's the first one? The 00:25:13.849 --> 00:25:17.210 Investor Intelligence Sentiment Index. This looks 00:25:17.210 --> 00:25:19.569 at professional newsletter writers, and it measures 00:25:19.569 --> 00:25:22.049 the spread between the bulls and the bears. When 00:25:22.049 --> 00:25:25.450 that spread hits a historic low meaning, basically 00:25:25.450 --> 00:25:28.150 all the pros are pessimistic, it's a very strong 00:25:28.150 --> 00:25:31.230 signal of a potential bottom. It quantifies the 00:25:31.230 --> 00:25:33.640 exhaustion of selling. That's so interesting. 00:25:33.720 --> 00:25:35.700 And you mentioned it's more reliable at bottoms 00:25:35.700 --> 00:25:38.140 than at tops. Yeah. Why is that? It's about the 00:25:38.140 --> 00:25:41.819 nature of fear versus greed. Fear is a powerful, 00:25:41.900 --> 00:25:44.859 sudden emotion. It leads to quick, sharp bottoms 00:25:44.859 --> 00:25:47.440 when everyone panics at once. Greed, on the other 00:25:47.440 --> 00:25:50.859 hand, is a slow burn. Euphoria can last way longer 00:25:50.859 --> 00:25:52.700 than you think is rational, so it's much harder 00:25:52.700 --> 00:25:54.700 to time the top. Okay. What's another indicator? 00:25:55.200 --> 00:25:59.440 The AAI sentiment indicator. This tracks individual 00:25:59.440 --> 00:26:03.240 or retail investors. When that reading is, say, 00:26:03.359 --> 00:26:06.839 minus 15 % or lower, it means a huge majority 00:26:06.839 --> 00:26:09.779 of individuals are negative. And that often means 00:26:09.779 --> 00:26:12.079 most of the decline has already happened. The 00:26:12.079 --> 00:26:14.460 retail investor is usually the last to capitulate. 00:26:14.859 --> 00:26:16.559 It's a measure of when the general public has 00:26:16.559 --> 00:26:19.180 finally given up. Are there tools that track 00:26:19.180 --> 00:26:22.740 actual bets being made? Yes. And those are very 00:26:22.740 --> 00:26:25.339 powerful. The put call ratio is a big one. A 00:26:25.339 --> 00:26:28.180 put option is a bet the market will fall. A call 00:26:28.180 --> 00:26:30.779 option is a bet it will rise. Right. So a very 00:26:30.779 --> 00:26:33.180 high put call ratio means traders are overwhelmingly 00:26:33.180 --> 00:26:36.420 betting on a decline. Paradoxically, that's often 00:26:36.420 --> 00:26:38.599 a bullish signal because it means bearishness 00:26:38.599 --> 00:26:41.200 is at an extreme. There's nobody left to sell. 00:26:41.339 --> 00:26:43.380 I see. And other things like the short interest 00:26:43.380 --> 00:26:46.019 ratio. That measures how many shares are being 00:26:46.019 --> 00:26:48.859 sold short. If that number is extremely high, 00:26:48.940 --> 00:26:51.019 it means there's a huge pool of future buyers 00:26:51.019 --> 00:26:52.819 because all those shorts eventually have to buy 00:26:52.819 --> 00:26:54.920 back the shares to close their positions. And 00:26:54.920 --> 00:26:57.079 that creates upward pressure. They all try to 00:26:57.079 --> 00:26:59.880 quantify the extremes of fear and greed. So to 00:26:59.880 --> 00:27:02.119 pull this all together, to synthesize the takeaways 00:27:02.119 --> 00:27:05.460 from this deep dive. Market movements are predictable, 00:27:05.700 --> 00:27:08.779 but only in their structure. Exactly. We know 00:27:08.779 --> 00:27:11.579 price action unfolds in these layers. The long 00:27:11.579 --> 00:27:14.619 secular trend, the medium primary trend, and 00:27:14.619 --> 00:27:17.579 the short secondary trends, that part is predictable. 00:27:17.819 --> 00:27:20.299 But the timing, the velocity of those moves, 00:27:20.519 --> 00:27:23.579 that's driven by crowd psychology, which consistently 00:27:23.579 --> 00:27:25.940 works against the average person's best interests. 00:27:26.140 --> 00:27:28.859 And the numbers give us the guardrails. We know 00:27:28.859 --> 00:27:31.960 a bear market is that 20 % decline. A correction 00:27:31.960 --> 00:27:34.200 is less than that. We know the average bull run 00:27:34.200 --> 00:27:36.700 is long and powerful over eight years, while 00:27:36.700 --> 00:27:39.119 the average bear market is short and brutal about 00:27:39.119 --> 00:27:43.160 13 months. And that cycle of accumulation, buying 00:27:43.160 --> 00:27:46.160 in fear and distribution, selling into euphoria 00:27:46.160 --> 00:27:48.960 is just constant. That psychological cycle is 00:27:48.960 --> 00:27:50.819 what makes it so hard. We're always fighting 00:27:50.819 --> 00:27:53.359 that urge to follow the herd, the instinct that 00:27:53.359 --> 00:27:55.160 causes the bubbles and the crashes in the first 00:27:55.160 --> 00:27:57.279 place. It's the fundamental challenge. So what 00:27:57.279 --> 00:27:59.920 does this all mean for the person trying to be 00:27:59.920 --> 00:28:02.410 disciplined and well -informed? It means the 00:28:02.410 --> 00:28:04.670 data can tell you about the structure and the 00:28:04.670 --> 00:28:07.390 potential severity, how long a downturn might 00:28:07.390 --> 00:28:09.549 last, how much you could lose. But it's your 00:28:09.549 --> 00:28:11.529 handle on psychology that will determine your 00:28:11.529 --> 00:28:13.990 timing and ultimately your success. And that 00:28:13.990 --> 00:28:17.130 leads to one final provocative thought. The material 00:28:17.130 --> 00:28:20.750 is crystal clear. We know a bull market ends 00:28:20.750 --> 00:28:23.170 in widespread euphoria. We also know the technical 00:28:23.170 --> 00:28:25.170 trigger for a bear market is that 20 percent 00:28:25.170 --> 00:28:28.529 drop from the peak. The challenge is this. If 00:28:28.529 --> 00:28:31.230 we are truly rational investors, we should be 00:28:31.230 --> 00:28:33.509 selling aggressively during that euphoria well 00:28:33.509 --> 00:28:37.029 before that 20 % drop confirms the damage. But 00:28:37.029 --> 00:28:39.150 can the rational discipline of technical analysis 00:28:39.150 --> 00:28:41.710 ever really overcome that fundamental human need 00:28:41.710 --> 00:28:44.890 to ride the wave, to chase that incredible 458 00:28:44.890 --> 00:28:47.549 % average return right to the very end? The real 00:28:47.549 --> 00:28:49.529 deep dive perhaps isn't into the charts at all, 00:28:49.549 --> 00:28:51.509 but into controlling your own behavior. And that's 00:28:51.509 --> 00:28:53.029 something for you to mull over until our next 00:28:53.029 --> 00:28:53.349 deep dive.