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1991issue C021-4

Filtered rally magnitude as a bull-regime breakout

A historical count discarded every move smaller than 5 percent, then compared remaining rallies with the first upswing of each following rising market. Editorial reading: use that contrast as a two-filter magnitude-confirmation, a breakout from the typical declining-regime-rally.

  • A filtered-swing is counted only after it exceeds a stated minimum percentage, so smaller fluctuations cannot mint a signal.
  • In the historical declining-market sample, most filtered rallies stayed small. First-rising-swings were typically much larger.
  • Magnitude-confirmation treats an unusually large advance from the latest-low-base as a breakout from the declining-regime-rally profile.
  • Editorial reading: once that breakout is stated, trend-following and momentum rules can be tested as one confirmation sequence.
Entries in this reading3 entries
Trend following89 readingsCurrent trackMomentum strategy103 readingsBreakout confirmation172 readings

Two filters for regime detection

Editorial framing: treat regime detection as a two-filter procedure. First discard every swing below a stated percentage so chart noise cannot mint a signal. Then read an outsized advance from the latest-low-base as magnitude-confirmation, a breakout-style test that the move has left the typical declining-regime-rally profile.

Once that confirmation is stated, trend-following and momentum rules can be tested as one sequence rather than as separate chart opinions. That use is editorial. The archive reports a historical classification of rallies, not a trading procedure.

What the archive counted

The historical comparison spanned 19 declining markets. It ignored every move smaller than 5 percent, then contrasted the remaining rallies with the first upswing of each following rising market.

A filtered-swing is a directional price move counted only after it exceeds that minimum percentage. The latest-low-base is the trough at which a suspected advance begins and from which the percentage rise is measured.

Typical size of each sample

In the declining-market sample, 61.3 percent of filtered rallies rose only 5 to 10 percent, and the median rise was 8.2 percent. Those advances are declining-regime-rallies: they occur inside a falling market and are later ended by a qualifying decline.

In the first-upswing sample, only 5.3 percent of advances stayed between 5 and 10 percent, and the median rise was 22.5 percent. A first-rising-swing is the opening advance of a new rising regime, measured from the low where that rise starts.

Thresholds that shift the count

After a 20 percent rise was halted by a decline of at least 5 percent, 10 of 19 such advances were still declining-regime-rallies and 9 were first-rising-swings. A halt-decline is a subsequent drop large enough to mark the end of a counted rally after still-smaller pullbacks are ignored.

A 21 percent rise left only 4 declining-regime-rallies in the sample against 9 first-rising-swings. The same sample placed a 23 percent rise at three-to-one in favor of a new rising market.

In that historical count, a 28 percent rise from the low left the advance almost entirely on the new-rising-market side of the sample.

Bear-rally vs first-bull-swing counts once a rise clears each filter

Once a decline of at least 5 percent is ignored, each further percent of advance from the latest low shifts how many of the remaining moves are still bear-market rallies versus the first upswing of a new bull market. At 20 percent the split is 10 to 9 (about even money). At 21 percent only four bear rallies are left against nine first bull swings (two to one). At 23 percent the source states three-to-one odds, and at 28 percent it treats the move as almost certainly the new bull. Counts at 20 percent and 21 percent are stated in the article; 23 percent follows the stated 3-to-1 odds against the same nine first-bull swings; 28 percent is the author’s almost-sure level.
Once a decline of at least 5 percent is ignored, each further percent of advance from the latest low shifts how many of the remaining moves are still bear-market rallies versus the first upswing of a new bull market. At 20 percent the split is 10 to 9 (about even money). At 21 percent only four bear rallies are left against nine first bull swings (two to one). At 23 percent the source states three-to-one odds, and at 28 percent it treats the move as almost certainly the new bull. Counts at 20 percent and 21 percent are stated in the article; 23 percent follows the stated 3-to-1 odds against the same nine first-bull swings; 28 percent is the author’s almost-sure level.Dow Jones Industrial Average

Moves smaller than 5 percent were discarded before the count. The 28 percent rise is measured from the most recent low on the Dow Jones Industrials, not from the prior bull-market high.

How the 28 percent rise was measured

The 28 percent threshold was the percentage advance of an industrial-stock average above the most recent low at which the rise began. The counted advance could include modest interim setbacks so long as the average later reached 28 percent above that low.

Editorial reading: in this sample, the 28 percent mark is the clearest magnitude-confirmation level. It does not convert the count into a live trading rule.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
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