Bear Knocking The Door, Buying More or Sell?

Mickey082024
04-07

$S&P 500(.SPX)$ $iShares Russell 2000 ETF(IWM)$ $NASDAQ(.IXIC)$

The Russell 2000 and Nasdaq Just Entered a Bear Market — Is the S&P 500 Next?

Well, here we are. After months of mixed signals, chop, and denial, the Russell 2000 officially entered bear market territory on Thursday. By Friday, the Nasdaq 100 followed suit. And now, all eyes are on the S&P 500, which is looking increasingly fragile. If it closes below 4873, it will have fallen 20% from its peak—putting it squarely in bear market territory as well.

This isn’t the outcome I expected. In fact, I’ve gone on record saying that a third bear market in five years was unlikely. But the markets don’t care what I think—or what anyone thinks. That’s the whole point. We deal in probabilities, not certainties. And when the improbable happens, the only thing that matters is how you respond.

So before I explain what I’m doing in response to this shift—and how I’m positioning myself to take advantage of it—let’s quickly lay out some context.

What Is a Bear Market (and Why Does It Matter)?

A bear market is when a major index closes at least 20% below its most recent peak. That’s the technical definition. But in practical terms, it signals a change in psychology. It’s the point where optimism gives way to pessimism, and price action begins feeding on itself.

  • Russell 2000? Already there.

  • Nasdaq 100? There too.

  • S&P 500? Down ~17% as of Friday. Just a few bad sessions away from joining the bear market club.

The significance isn’t just about hitting an arbitrary number. It’s about what that number represents: fear, forced selling, margin calls, algorithmic triggers, and retail traders bailing out at the worst possible time.

It’s also a moment where experienced investors lean in—not away.

Why I Didn’t See This Coming (And What Changed)

Let’s rewind for a second.

Historically, bear markets occur roughly once every six years. Since 1950, we’ve had twelve. Most of them were tied to recessions—the natural result of long economic expansions that overheat and correct.

But the last two bear markets didn’t follow that pattern. They were abrupt, policy-driven, and emotionally charged:

  • 2020: COVID lockdowns triggered a 35% market collapse in record time. No economic cycle could’ve predicted that. But as quickly as markets fell, they came roaring back once vaccines arrived and restrictions eased.

  • 2022: Inflation panic hit fever pitch. The Fed went into full hawk mode, raising rates aggressively. Markets responded by pricing in a deep recession that never came. When the worst didn’t materialize in 2023, stocks rebounded—hard.

That’s why I was skeptical of a third bear market so soon. We’d already had two non-traditional drawdowns. How many policy-induced panic attacks can we really expect in one half-decade?

Apparently: one more.

This time, it’s trade policy again. Specifically, the return of aggressive tariffs under the Trump administration. We’re staring down the barrel of a potential global trade war. Investors know how these stories go—slower growth, higher input costs, and geopolitical instability. Even though the fundamentals remain solid (no recession, earnings still decent), markets are pricing in chaos.

And here’s the thing: markets don’t wait to see if something happens. They anticipate outcomes. Right now, they're anticipating escalation—and pulling the fire alarm before the building fills with smoke.

This Drop Has Been Parabolic—and That’s Important

Let’s talk about speed.

This current drop has been parabolic. The chart looks like a vertical cliff. A 90° nosedive that suggests panic, not reason.

And when drops happen this fast, they tend to be overdone. Think about how a rubber ball bounces: the harder it hits, the faster and higher it snaps back.

Let’s look at some historical examples:

Sharp Drops = Fast Recoveries

  • 2020 (COVID Crash): The S&P 500 dropped 35% in just 22 trading days. Most brutal bear market ever recorded. But it ended the year up 18%.

  • 2018 (Trade War + Taper Tantrum): Markets fell 20% on fears of rising rates and tariffs. Then 2019 roared back with a 31% gain.

  • 2015–2016 (China Slowdown + Oil Crash): Two sharp legs down. But the recovery was swift—a 24.8% bounce from the lows.

  • 2011 (US Debt Downgrade + Euro Crisis): A 21.6% fall, followed by a 34.3% rally within a year.

Slow Declines = Long Recoveries

  • 2000–2002 (Dot-Com Bust): Took nearly a full year to enter a bear market, then spent over two years grinding lower.

  • 2008 (Global Financial Crisis): 265 days to hit bear territory. Took more than 18 months to dig out of that hole.

What’s the pattern? Fast falls are typically not the sign of structural collapse. They’re panic selling. And panic, by definition, doesn’t last forever.

So, What Am I Doing?

Here’s what I’m not doing:

  • I’m not selling.

  • I’m not shorting.

  • I’m not sitting on my hands.

Why? Because history tells us that trying to time sharp drops is a fool’s game. Most retail traders get smoked trying to play hero at moments like this.

Here’s how it usually plays out:

  1. They panic sell near the bottom.

  2. The market rebounds sharply—they chase it and buy back in.

  3. Then it dips again—they panic sell again.

  4. And then the market rallies for real—and they miss it completely.

Or even worse: they short the bottom and get squeezed to oblivion on the rebound. It’s financial whiplash. And it’s why so many smart people underperform the market—because they’re busy trying to outmaneuver it.

Instead, I’m slowly accumulating positions I like. I’m prioritizing companies with solid balance sheets, high free cash flow, and global exposure that can actually benefit from policy shifts down the line. Because here’s the thing: the market is not the economy. It prices in expectations—6 to 9 months in advance.

Right now, the market is pricing in a trade war-fueled recession. But what if it doesn’t happen? Or what if it gets resolved faster than expected? Or—God forbid—the market overreacted again? If that’s the case, we could see a face-ripping rally that punishes the pessimists and rewards the patient.

Final Thought: Be a Buyer, Not a Victim

Bear markets aren’t fun. Nobody enjoys watching red candles stack up like a horror film blood count. But for long-term investors, they’re a gift—a reset button for valuations.

This isn’t 2008. It’s not the dot-com bust. The fundamentals are intact. There’s no systemic credit crisis. The fear right now is about narratives, not numbers. And narratives? They can change in a single headline.

So no—I’m not panicking. I’m planning. I’m watching. I’m building positions. Because when the rebound comes—and it always does—I want to be holding the assets that everyone else will be scrambling to buy back.

Key Level to Watch: Will the S&P 500 Join the Bear Market Club?

We’re at a major inflection point.

If the S&P 500 closes below 4,800, it will officially join the Russell 2000 and Nasdaq 100 in bear market territory. That would mark a new bear market in under 50 trading days—making it one of the fastest on record.

So while I won’t pretend to know exactly where the bottom is, I can tell you this:

This is not the time to panic. This is the time to prepare.

And in any bear market, the most important question becomes: How low can we go?

How Low Could This Bear Market Go?

We can’t predict the exact bottom—but we can use history as our guide.

Historically, bear markets tend to bottom out somewhere between 20% to 35% below their highs. Based on my own analysis, I don’t believe this current move will exceed a 25% drop from peak to trough.

That gives us a potential downside target of around 4,657 on the S&P 500.

Let’s break down how I arrived at that level.

The 50-Month Moving Average: A Line in the Sand

On the monthly chart, there’s a clear and consistent pattern that’s held up across decades:

The S&P 500 has reliably found strong support at the 50-month moving average.

Whenever we’ve approached that level—even during major selloffs like 2011, 2016, 2018, 2020, and 2022—the market bounced. Sometimes there were intramonth dips below the line, but by the time the candle closed, buyers had stepped in.

Today, we’re once again nearing that 50-MA zone. It’s currently hovering right around 4,657, making it a key final support level before we see a major rebound.

That said, we’re not going to reach that number in a straight line. Nothing ever moves in a straight line in markets.

Expect a Relief Rally Soon — Possibly This Week

After a fast and furious drop, the market is extremely oversold—both technically and sentiment-wise.

I’m actually expecting a short-term relief rally very soon—possibly between Monday and Wednesday of this week.

Let’s look at the technical evidence to back that up.

Oversold Indicators Flashing Green: Williams %R

One of my favorite indicators—especially for timing bounces—is the Williams %R, developed by legendary trader Larry Williams.

On the weekly chart, I use two key settings:

  • Williams %R (52 period)

  • Williams %R (13 period)

When both lines fall below -80, it signals that the market is in deeply oversold territory.

Historically, this setup has nailed multiple short-term bottoms—even during longer downtrends:

2020 COVID crash: Both lines dipped below -80 right as the bottom formed. 2018 correction: Same thing—oversold Williams %R led the bounce. 2011, 2016, 2022: All followed the same pattern.

Right now? Both lines are again below -80. Translation: This market is ripe for a short-term bounce.

Institutional Buying + Pessimism = Reversal Fuel

Let’s dig deeper.

Over on StockCharts.com, there are two other powerful signals I track, also rooted in Larry Williams’ methodology.

1. Money Flow Index (MFI)

When the red line of the MFI breaks above the green level (typically around 75), it suggests institutional accumulation—that big players are stepping in to buy.

That’s happening right now. This indicator flipped bullish just as we hit oversold extremes—an encouraging sign that smart money is positioning for a reversal.

2. Sentiment Index

This one is a contrarian signal.

When the green line (representing investor optimism) falls below the red line (representing fear or pessimism), it signals extreme bearish sentiment—the kind of environment that typically marks turning points.

Right now, sentiment is deep in the fear zone. And as history shows, markets don’t bottom on good news—they bottom on bad news that’s already priced in.

So, What Does This All Mean?

Let’s be clear: these indicators don’t predict the future. They’re not magic. But they do stack the odds.

And right now, the odds are tilted in favor of a short-term rally.

So here’s my playbook:

  • I’m not shorting the market.

  • I’m not panic-selling high-quality holdings.

  • I’m using this opportunity to accumulate shares of fundamentally strong companies—especially those that are oversold and underloved.

Now, if you’re holding speculative, unprofitable, or overpriced names, sure—tighten up your stop-losses. But if your portfolio is built on strong foundations?

📉 This is the pullback you’ve been waiting for.

This Is Where Wealth Is Made

We’ve all heard the quote: "Buy when there’s blood in the streets—even if it’s your own."

It’s cliché, but it’s true. Market fear creates market opportunity.

The next wave of wealth will be built not by trying to time the exact bottom, but by buying great businesses while others are frozen in fear.

Which Sectors Are Ripe for Opportunity?

Right now, three sectors stand out as oversold but highly attractive for long-term investors:

  • Technology

  • Consumer Discretionary

  • Communication Services

These are the same sectors that led the charge out of the 2020 and 2022 corrections—and they’re getting thrown out right now with everything else.

In my next video, I’ll break down my top high-quality stock picks from each of these sectors—so you can move decisively while everyone else is sitting on their hands.

Final Word: Stay Calm, Stay Tactical

This isn’t the time for fear. It’s the time for focus.

  • We’re approaching a major support level.

  • Indicators show oversold extremes.

  • Institutional buying is quietly underway.

No, we don’t know the exact bottom. But we don’t need to. Because wealth isn’t built at the perfect moment. It’s built by showing up consistently, with conviction, when everyone else is uncertain.

Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.

@Daily_Discussion @TigerPM @TigerObserver @Tiger_comments @TigerClub

💰 Stocks to watch today?(30 Apr)
1. What news/movements are worth noting in the market today? Any stocks to watch? 2. What trading opportunities are there? Do you have any plans? 🎁 Make a post here, everyone stands a chance to win Tiger coins!
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
Click to View

Comments

  • Valerie Archibald
    04-09
    Valerie Archibald
    IWM getting hit by interest rates that will probably go up and tariffs will crush a lot of small companies who import a lot of products.
  • Mortimer Arthur
    04-09
    Mortimer Arthur
    Russell 2000 has had 4 full year drops of 20% or more since 1988 (excluding 2025). The index is down 21% already this year.
Leave a comment
2
5