Ask Colin

Please have look at the chart in the attachment. My question simply is whether the trend lines marked T2 and T3 can be considered as valid?

I have no problem with your statement the T1 and T2 are valid trend lines, though some may argue whether the 1997 trough was sufficiently close to the trend line.

However, my concern is with trend line T3 which obviously does penetrate bars if extended backward in time and therefore does not comply with the rules as a valid trend line. Thus, do we have to regard the uptrend which began at 'Y' as NOT a new bull market because although it makes new higher peaks and troughs, a valid trend line cannot be draw through the troughs?

The trend line you have labelled T3 is not a valid trend line. It is only a tentative trend line. To be a valid trend line it needs to respect the trend line a third time.

I do not see how this has any bearing on whether there is a bull market in place. You have trend lines drawn on three of the legs of a primary bull market - T1, T2 and T3. I don't think anyone would describe the trend from Y as a bull market, when a clear primary bull market has been in place from the start of your chart. Whether T3 is a valid trend line has no bearing on whether there is a bull market in place. It only bears on whether the trend line on the latest leg of the bear market is a valid line or not.

It follows that if the trend at T3 cannot be regarded as a new bull market, then it has to be regarded as another impulse wave of a larger bull market which began at "X" (31/01/1995), and that the "bear market" at DT2 will have to be regarded as a corrective phase of that larger bull market. Am I correct in my thinking here?

[It is noted that if a trend line is drawn through X and Z to show this larger bull market referred to above, that it too if extended back in time will penetrate price bars and therefore it will also have to be regarded as invalid! This brings us to point I made in my previous email as to whether to regard the whole price movement from mid-1990 to present day a one big bull market with trend line LT1 tracking its progress.]

I agree, as already stated above that T3 is drawn on the latest leg of a bull market. However, I do not see that bull market starting in 1995. It seems to me that the bull market has been in place for the whole of your chart and maybe earlier. I do not have data for the 3 year Bonds that goes back far enough. I have 10 year bond data back to 1980, which suggests that the bull market may have begun in 1982, but I would like to see the chart back to 1974 to be sure.

The line X - Z cannot be a valid trend line as you suggest, for the reason you suggest. It is just a line through some troughs over part of a bull market and runs across a secondary reaction. Unless it also runs below all other troughs at the end of all the other secondary reactions without cutting through any bars before or after it begins, it is not a valid trend line.

I agree that DT2 would be a secondary movement within the bull market.