1) Moving Averages — If traders had been fading the false breakouts to the upside and false breakdowns to the downside in a trading market, they would fi nd their last trade to be a disproportionate loss (long in a bear market). There really isn’t much chance to recoup this loss because the breakdown is fast and severe. It is best not to fade the markets on the buy side using moving averages after the markets have had a severe run up going into a trading range market.

2) RSI, %R and Oscillators — If traders had been selling overbought and buying oversold indicators in a trading market, they would suffer a large loss on the last trade. Traders would also fi nd a growing number of oversold indicators and a diminishing number of overbought signals using standard parameters. This signals an impending change in the state of the market condition.

3) Stochastic — Crossovers from the overbought side to the downside are more valid than crossovers to the upside from the oversold level.

4) On-Balance Volume and Tic Volume — These two indicators are unreliable for forewarning traders of impending weakness. The best that traders can expect from these indicators is a flattening of the OBV pattern, implying a possible, but not certain, breakdown. The prices would drop dramatically and then the volume indicators would indicate a breakdown.

5) Elliott Wave — In Elliott Wave corrections, traders have a one-in-two chance that the correction could possibly turn into a bear market sell-off (a zigzag instead of a fl at correction). However, in the formation of this correction traders cannot tell until they approach the forecasted event that the correction could turn into a bear market correction instead of a fl at correction. If the market turns into a bear market correction they only have to sell into new lows and maintain a short position to profit from the move downwards. If, however, it turns into a fl at correction, they will fi nd themselves selling the bottom. Elliott Wave analysis does offer inkling about what type of correction traders can expect, based on the existence of alternative patterns prior to the one currently under examination.