Big stock market trends don’t progress up or down in a straight line. In a bear market, stocks typically rebound after the first leg down. In a bull market, the opposite happens: Stocks again take a big dive, making everyone think the bear market has returned.
But in a bear market, that “first leg down” is wave 1 and the partial “rebound” which follows is wave 2. I say “partial” because the only rule which applies to wave 2 is that it cannot retrace 100% of wave 1. Meaning, the bear market rally cannot go above the previous market top.
