Well, the past two weeks have proven that it can happen more often than you'd expect, as we've had the 2nd such occurrence in less than 30 days.
The chart below, courtesy of ZeroHedge.com, shows that the market (ES futures contract) moved from below 1080 to above 1220 points in about 8-9 trading days. This is a 140-point move, above 50% more than the 80 points move I mentioned in my previous post.
The conclusion that I have drawn from the market action of the past several months is that while crashes are fairly rare in normal markets, the only reason why it is widely considered that crashes only happen downward, is that what people consider as normal markets are bull markets.
Well, this is statistically true, but, when in a secular bear market, the normal market is downward, and so, there's a small leap of faith to make to believe that in that case, crashes will be upward?
It is hence my belief that we are in a secular bear market now, and that this sharp rallies should be sold short.
That said, it's obviously very difficult to spot the top, as you can see in the market action of the past few days: no matter how bad the news, the markets decided to rise sharply. I still believe that we are close to the top — 2-5% percent max — if we haven't touched it already.