Issue link: http://resourceworld.uberflip.com/i/99312
"…the bear market, that we are told we are in, is a result of herd mentality; it is a self-fulfilling prophecy. It is up to the individual investor to decide how mass psychology will affect the markets." I recently attended the San Francisco Hard Assets Conference where I listened to many respected speakers from the resource sector including Rick Rule of Sprott Asset Management and Lawrence Roulston of Resource Opportunities. My interpretation of their talks is that the bear market, that we are told we are in, is a result of herd mentality; it is a self-fulfilling prophecy. It is up to the individual investor to decide how mass psychology will affect the markets. Let's start by defining a bear market. Although vague, the Investopedia.com definition of a bear market is: "A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment to be self-sustaining. As investors anticipate losses in a bear market and selling continues, pessimism only grows." The definition goes on to say that if this happens "over at least a two-month period, [it] is considered an entry into a bear market." Rick Rule pointed out in his talk that "bear markets beget bull markets and bull markets beget bear markets." Determining whether we are in a bear or bull market boils down to a determination of time. Knowing that a bear market will lead to an eventual bull market, let's take a look at some charts of the indices to see where we are. Using charts helps to determine the market we are in and can help us predict where they might be going. The first chart that we will look at is a two-year chart of the TSX Composite Index. First glance shows that the index has been in a downward trend since April 2011, as highlighted by the red line. This downward trend was broken in midAugust and the index has been sideways, DECEMBER 2012/JANUARY 2013 www.resourceworld.com 17