Blind Faith to Formula

There is "The 20 Percent Rule” in an investment world to determine when it is a beginning of a bear market. The Rule indicates that only after 20% loss from the climax of the index marks the beginning of a bear market. For this reasoning, it sounds ridiculous. Put it an example, if market is down 21% in the morning, it is a beginning of a bear market; and if market rebound back afternoon, surpassing 20% mark, it is a bull market again. This rule is useful for an academician who works inside ivory tower, but not in a harsh, real world. A beginning of a bear market not necessarily caused by a recession (though it always be), but because stocks are wildly overpriced. Price will always retreat back where it came from. The higher the price, the steeper the decline.