Subject: Re: Have Bear Catchers worked post-discovery?
Dear all.... I think one ought to understand the motivations and underpinning assumptions of each of these rulesets/indicators and then make an informed call.
FULL DISCLOSURE - I follow all 4. And here's the reason why.

But before I forget : "GTT looks to do this better than BCC, -18% vs. -34%." - Ray : This statement might be false.

Zee.... Check the tables #s please - NAHL by construct is the fastest of the lot - so to see an MDD of -34% on it is surprising. IIRC - it was basically negative all the way in GFC 2008 period - so the only option is COVID ..... and by my own tweaked version NAHL exit is 2/24/2020.

Is there a chance you juxtaposed the DBE and NAHL#s - because that would be my next counter - DBE took it in the brunt in COVID - again by construct .... Index was at high 2/19 - which means no DBE possible before mid-July appx - thus that -16% for DBE looks suspect also.


Here's my commentary /understanding of each of these and I'll go slower to faster ie in terms of trigger frequency

(1) DBE-BCC: Dying Bullish - as the name itself suggests motivation is to "Wait and See" whether Bullish euphoria has disappeared. For all practical purposes MDD may not exactly be the best metric. As I understood from Jim's comments - his observation was - typically Start of a Bear provides one last opportunity to exit closer to the last high - and it typically falls in the 5-6 months out period.

Of course, if the index has marched onwards - this stops you from selling out in corrections.

This is basically a TIME ONLY indicator - price check is simply No New High

(2) Slope-BCC : This is a geometrical indicator - its practically 2nd order. Its the 2 week change of Slope ( First derivative) of the 200d MA. (ie appx 50wk SMA equivalent). The change in slope being 2week also helps smoothen it out a bit

This is a PRICE ONLY indicator - but with a 200d SMA and a 2 week change in it ( Slope change <0) its a double smoother.

The exit closeness to the peak is purely defined by how close the 200d MA was to the high at the beginning and the sharpness of the fall. You will have to endure the first leg in the brunt of the face. Its hypothesis is - it will continue.

That of course has been its bane a bit in the post 2009 cycle - ie in some of the deeper corrections - it will signal right close to the bottom


(3) GTT - Macro : This one is a bit different - it actually has an over-arching macro Overlay. And hence is fairly complicated.

Why ? It depends on how FAMILIAR you all are with US Macro series publications. Post-facto data ( ie for eg if you download today from FRED) is literally the FINAL ie Last revision - that typically can happen almost 2-3 quarters ie 6-9 months AFTER ie Look-Ahead bias.

The initial OVERLAY check is simple : Before even looking into the price action - you look at the 2 aforementioned indicators ( or actually your favorite RECESSION indicator) and follow the monthly FRED release update - which is typically towards the 3rd week of the month - and see if they have gone Negative YOY. Else - whatever price action is you hold.

Hypothesis : Unless there are recessionary clouds in the horizon - there cant be deep bears. Your expectation should be ~ -20% drawdowns on this - because there are technical/structural bears ( eg LTCM crisis etc)

But there's an underpinning to it - lets take the last 3 triggers on this

(a) COVID Sell : 1st week of March Open. ie immediate sell - Why? - INDPROD was YoY negative since late 2019 ie Economy was slowing. This was also caught by the Yield Curve inversion - another EXCELLENT macro indicator

(b) 2022 Bear : Late sell - April. Due to RRSFS - but its extremely tight - it went briefly negative in Mar 2022 - and practically remained positive - at least in the periods when the SMA fell below, while when in the interim months when it printed negative the SMA was above.

(c) 2018 Just-Bear: It makes you sell right at the wrong place - towards end of Dec 2018 - as RRSFS goes negative. The SMA went negative with the -2% threshold in Oct '18 itself


(4) NAHL ( With your preferred version of MA smoother) : This is the ONLY Breadth dependent indicator of this lot.

Very simple hypothesis - for a Bull market there needs to be more highs that lows. Its also the reason why this is not necessarily a Bear Indicator - its a "Non-Bull" period indicator. Hence its fast to get out - and of course also relatively fast to get in.

You will have a LOT OF TRADES with this - if its your ONLY one. But as Zee's table shows - in the time since GFC - there's been a decent amount of stocks which have languished - ie breadth really has not been uniform across the market - hence it actually has had the benefit of some really good side-stepping trades

eg. The last exit on the 2021-22 Bear - it was IIRC 1 day within the high ( could well be 1 day BEFORE!)

It operates on the notion - you cant CHEAT MARKET BREADTH!

In summary - these are following posits and timers

(1) DBE : Last breath ( not breadth) of the bulls gasp - Sell 5 months out and run for cover!
(2) Slope: Pure geometric Change in Trend detection - hence double smoothed. You know what you are getting into and that's exactly what you get.
(3) GTT : Macro DOMINANT. No Recession - No fundamental problem in markets. Else Geometry ie 43wkMA Change in Trend
(4) NAHL: Market (ie Daq) Breadth ... Cant hide from breadth. Bull - please show me you have strength. Hence possibly different from the others.

Actually both DBE and NAHL are - DBE is the last gasp check. NAHL is a Non-Bull check.

Hope this made sense and helps!
Best