Is this a bear market rally or a new bull market?
What is a Bear market rally, how to recognize it, what to do?
By Guy Avtalyon
Some analysts claim that the bear market rally will come later this year or next. If it will, it is time to get out of stocks. The returns tend to be the strongest 12 months or so before the start of a collapse.
Historically, profit has been smaller for investors who got out two or three years prior to a recession.
But, past performance is no guarantee of future results.
So, are we in a bear market rally or a new bull market?
We’ve been in a bear market since the market’s peak in early October.
The current stock bull market becomes 10 years old this month.
It was a useful time to participate. Especially if you’ve held to an investment strategy that prefers dividend-paying stocks.
The bull market will end with a whimper. There will not be a bang!
We’re definitely in a bear market. It started on September 21 of last year, actually. On that day the S&P 500 last hit a record high.
A standard bull market pattern looks like an elevator. It is described as a gradually rising market with an absence of volatility.
For example, the bull market of November 2016 to January 2018 was a typical bull market.
There wasn’t one 3% pullback during the entire period. That was a new record on the market.
There is always the risk that this time is different due to changes in market structure.
We are at the beginning of a “new bull market” at least in a headline-oriented technical sense.
Will it last, or are we fated for a double top?
This month is likely going to be a crucial point in helping to find the answer.
Three big news events were set to reveal what markets the world over have been expecting for years already.
The first was the March 1 trade deal deadline that President Donald Trump had set with China.
The second is the March 29 Brexit deadline. The third materialized in February with the Federal Open Market Committee releasing its Jan. 30 meeting minutes. In those minutes, “almost all” FOMC members agreed that an announcement to end balance sheet normalization should be made “before too long.”
What is the bear market rally?
The stock market is volatile and in continuous changes. Investing in stocks is relatively risky. It can be difficult for even the most experienced analysts to predict where the market is headed at any given time.
Even throughout times where the market seems to be acting well, stock prices can apparently begin to fall.
On the other hand, there is a possibility for stock prices to rise in a poor market.
That is known as a bear market rally.
A bear market rally is a period during which stock prices increase despite the fact that the market on a whole has been on a downward swing. This is the definition.
So, once again!
The bear markets are characterized by falling stock prices. When markets upswing that can be a pleasant turn for investors. Also, it has some disadvantages.
Bear market vs bull market
The terms “bear market” and “bull market” are adopted to define the quality of the stock market over a given period of time. They are originated from the behavior of how these animals strike their victim.
When they’re on the offensive, bulls tend to attack with their horns thrust upward, but bears tend to swipe their paws down.
When is the bull market, we are talking about high investor confidence and widespread optimism. Through a bull market, stock prices frequently go up within other positive economic factors.
A bear market, as contrast, is a period of low investor trust and depression. Stock prices normally fall during bear markets. They usually project overall economic downfalls.
Dangers of bear market rallies
Through a bear market rally, stock prices regularly rise between 10% and 20%. Bear market rallies can last from a few days to several months. Anyway, they are short-lived.
The confusing thing, a bear market rally with an approaching bull market, are both periods where stock prices rise.
Where is the difference?
The difference is that bear market rallies are temporary, and they’re almost always come before periods of more drops. Just before the stock market crash of 1929, for example, there was a brief bear market rally. Unfortunately, that really was replaced by a deeper crash that in the end resulted in the Great Depression.
At first sight, a bear market rally sway appears like a good thing. The investors have a break from the descending direction of the market.
True is, bear market rallies can be terrible for investors who start buying stocks because they hope that things are turning around on a long-term cornerstone.
They lose money when those rallies end and the market proceeds its continuing drop.
The reality is that it is hard to separate the bear market rallies and new bull markets.
It makes buying stocks a gamble.
Especially if you are for short-term investors looking to get in and get out quickly.
Long-term investors are not burned when bear market rallies give way to plunging stock prices.
They can wait for the crisis to go away.
Don’t waste your money!
