While the generally accepted definition of a bear market is a 20% decline over a two month period. I am referring to just being bearish, believing the market will go down, seeing signs of a down trend before you are sitting with a 20% decline in your accounts or more while holding what were market leaders and are now spiraling downward.
- The market begins to start up in price in the morning but end up closing lower each day for multiple days.
- Previous stocks that were leaders are struggling at their 50 day moving averages, many below.
- The market as measured by the SPY ETF (exchange traded fund) is trading below its 200 day simple moving average and the 200 day is sloping downward.
- There is a lot of uncertainty about the future in the broad economy.
- The total market along with individual stocks keep having trouble finding support at specific levels but continually have very defined resistance levels in price.
- The market is making lower highs and lower lows.
- There is a lot of fear about some event that may or may not happen and their is a wait and see attitude.
- Money is flowing out of mutual funds and into bonds in large amounts.
- Talking heads are trying to convince people to buy stocks, that they are now a great ‘value’.
- Consumer staple type stocks start being the best performers, Wal*mart, McDonalds, and dollar stores.
When all these things line up it is a high probability you will win by selling short at price resistance points, buy puts, and take retirement accounts to cash that do not let you buy reverse ETFs. This is a time to be cautious.
No matter how great a company is or how amazing their earnings, a bear market is like a hurricane, it damages all boats regardless of how great they are.