Important Notice About Bear Alert Relevance:
The Bear Alert Indicator is designed to be used as a modification to another core strategy, such as Upgrading or Just-the-Basics. However, new research completed in 2017 has largely superseded the Bear Alert signals. We encourage you to read SMI’s Fund Upgrading Strategy Evolves: Introducing Upgrading 2.0 for details on that new system.
If you’re following Fund Upgrading, we encourage you to follow the signals that are part of that strategy rather than relying on the Bear Alert Indicator. If you’re using Just-the-Basics, or managing a 401(k) or other retirement plan, we encourage you to still monitor the signals from Upgrading as a primary signal of when to make adjustments to those portfolios.
The Bear Alert Indicator will continue to be tracked, but more as a confirmation to the signals coming from Upgrading.
On Bear Markets and Boundaries has information on how SMI used to recommend the Bear Alert Indicator be implemented. Again, this has largely been superseded by the newer Upgrading 2.0 research.
|"Bear Alert Indicator" Status
|Date of high closing price of bull market
|S&P 500 stock index closed at
|15% decline requires a Friday close at or below
Bear Alert Background:
[Some of this information is now dated. Read the "Important Notice" section above.] There are times when some SMI readers desire to temporarily boost their stock holdings (go for more growth) or cut back on same (reduce their risk). They've asked for our help in identifying the larger bull and bear market trends so they can adjust their portfolios with a higher level of confidence than the proverbial "shot in the dark." It's in response to those requests that we present this information.
The "Bear Alert" indicator attempts to measure the likelihood that a new bear market is about to begin. Our BA signal attempts to distinguish between a sell-off that is within the bounds of normal bull-market activity and one that is likely to turn into a full-fledged bear market. It's been accurate 10 out of the 13 times it has sounded in the past 50 years, and the market has proceeded to fall an average of nearly 20% further those 10 times.
This tool can help you assess the current trend so that changes can be made in your stock-to-bond mix if your risk temperament or season of life require it.
More information: Read Understanding SMI's "Bear-Alert" Indicator.