Source: https://www.linkedin.com/feed/update/urn%3Ali%3Ashare%3A6988222504804777984
9 Stages of the Current Bear Market: Where Do You Think We Are? Bear markets typically end with a massive selloff. Here’s what to do before then:
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Official #definition of a #bear #market is a 20% or greater decline from an index’s previous high: so all three major U.S. #stock-market #benchmarks — the Nasdaq, the S&P Global 500, and the Dow Jones Industrial Average DJIA — are currently in a #bearmarket. A typical bear market can #evolve through nine #stages that intermingle.
1. Failed rallies: Failed #rallies represent the first clue that a bear market is here. Failed rallies often appear before the market “officially” becomes a bear market. If the rally doesn’t have legs and cannot go higher for the next few days or weeks, it confirms that the bear’s claws have sunk in.
2. Low-volume rallies: #Stocks move higher on low #volume. This is a clue the major #financial #institutions aren’t buying, although #algos and #hedgefunds might be. It’s easy for the #algos to push #prices higher in a low-volume environment, one of the reasons for monster rallies that go nowhere the following day.
3. Terrible-looking charts: #Stock #Charts start to look dreadful, both the #daily and the #weekly. While rallies help relieve some of the pressure, they typically don’t last long.
4. Strong selloffs: It’s been a couple of years since markets have experienced extremely strong #selloffs, but that #record was broken the week of September 26 when the S&P 500 hit a new #low for 2022.
5. Mutual-fund redemptions: During this stage, after looking at their #quarterly and #monthly #statements, horrified #investors throw in the towel and sell their #mutualfunds. #Mutualfund companies are forced to #sell (which negatively affects the stock market).
6. #Complacency turns to #panic: As more #investor #money leaves the #market, many investors panic. The most #bullish investors are holding on for dear life but are buying fewer stocks. The most #nervous
7. All news is bad news: As the bear market pushes #stockprices lower, it seems as if most #economic #data and #financial #news is negative. Many people become skeptical of the #bullish #predictions and investors sell to avoid #risking precious #gains.
8. Bulls throw in the towel: As #trading #volume increases on down days, and some investors experience 30% or higher losses, they give up hope and #sell.
9. Capitulation: After weeks and months of selloffs (and occasional rallies), many investors are panicked. Investors realize that it may take years before their #portfolios will return to #breakeven, and some stocks never will.
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