Cyclical bull and bear markets can last from several months to a few years. Secular bulls and bears last several years to decades and include multiple cyclical markets. The 2022 cyclical bear was far closer to the average cyclical bear in a secular bull than a cyclical bear in a secular bear, explains Michael Murphy, editor of New World Investor.

I continue to think we are in a secular bull market to 2036, based on the 36-year cycle that last peaked in 2000. But there will be cyclical bear markets along the way.

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Bear markets usually start when everyone is bullish – not because they are bullish, but because events and factors that might be shrugged off in a doom-and-gloom environment can derail those who are overleveraged in a snorting bull market.

So, I am keeping an eye on this: Retail traders haven’t been this bullish on US stocks in 27 months, the last time the market was notching all-time highs. The American Association of Individual Investors sentiment survey hit a 12-month high for bulls this week.

The closely watched bull-bear spread was positive for the seventh straight week, rising to 29.9 in the week ending July 19. That’s the most bullish stance since April 2021, and a jump from a 15.1 reading in the prior period.

Data compiled by Vanda Securities also shows the day trader crowd – often over-leveraged – has piled into big tech and benchmark exchange-traded funds in recent weeks, including pushing more than $7.2 billion into the equity market over a recent five-session period.

I’m a long way from bearish, but that certainly makes me less bullish in the short-term. It’s important to remember that after a bear market makes everybody feel terrible, the subsequent bull markets can last for years.

Finally, the fractal dimension shows the current uptrend still has some energy to go higher, but we’re getting close to the end. Perhaps an earnings season that’s not as bad as expected will provide the last bit of juice.

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