Is the bullrun over? A historical risk analysis

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Two months I created a post to take a pulse of the market when we were at all time highs. Since it was super well received, let's update our risk metrics from the previous post and see where we stand after this correction. Clearly, we're not as euphoric as last time. TL;DR at the bottom. Always keep in mind:
We'll capture the market by taking a weighted average of my favorite metrics: Alphasquared (link) – 40%
Benjamin Cowen (YouTube) – 30%
RSI (link) – 20%
CBBI (link) – 10%
Now, let's combine all of these:
What This MeansOur weighted risk score has dropped from 64.4 to 48.4 out of 100. This puts us in more neutral territory compared to the elevated risk we saw two months ago. It's worth noting that every previous bull run has featured multiple corrections of 30-40% before reaching the actual market top. The Importance of StrategyHaving a clear strategy remains crucial during these market fluctuations. If risk continues decreasing, this presents an opportunity to accumulate at better prices. Conversely, if risk begins climbing again in the coming months, a disciplined DCA-out approach becomes important. The worst approach would be to get disinterested and leave the space after incurring losses. Remember that lower risk environments are precisely when accumulation becomes most beneficial. Even if we enter a bear market, which can be painful and boring, this is historically when the groundwork for significant returns is established. The core principle remains: the lower risk goes, the more you should consider buying. The higher risk goes, the more you should consider taking profits in incremental steps. TL;DR: The recent 25% drop from ATH has significantly lowered our risk metrics from 64.4 to 48.4. Historical patterns suggest this is a correction rather than the end of the bull market (see charts). submitted by /u/AlexWasTakenWasTaken |