Why Bear Market Phases Are Like “The Revenant” (by Lancet Roberts)

If you haven't seen the movie "The Revenant" with Leonardo DiCaprio, it is a 2015 American survival drama describing frontiersman Hugh Glass's experiences in 1823. Hugh, an expert hunter and tracker is mauled by a grizzly bear in the film. (Warning: the scene is very graphic)

In the scene, the attack comes in three distinct waves.

1. The bear attacks, and brutally mauls Hugh, who plays dead to survive. The attack subsides.
2. The bear comes back, and Hugh shoots it, provoking the bear to maul him some more.
3. Finally, Hugh pulls out his knife as the bear attacks for a final fight to the death. (Hugh wins if you don't want to watch the video.)

Interestingly, this is also how "bear market phases" work.

Bob Farrell, a legendary investor, is famous for his 10-Investment Rules to follow.

Rule #8 states:

Bear markets have three phases – sharp down, reflexive rebound and a drawn-out fundamental downtrend

1. Bear markets often START with a sharp and swift decline.
2. After this decline, there is an oversold bounce that retraces a portion of that decline.
3. The longer-term decline then continues, at a slower and more grinding pace, as the fundamentals deteriorate.

Dow Theory also suggests that bear market phases consist of three down legs with reflexive rebounds in between.

The chart above shows the last two primary cyclical bear market phases versus today (I adjusted the 2022 scale to match.)