Weekend Daily: Tips for Trading Profitably in a Bear Market
Many investors have had a rough year.
2022 has been characterized by turbulence in financial markets. The Nasdaq, S&P 500, and Russell 2000 are all in bear market territory, while the Dow Jones is the only U.S. index down less than 10% YTD. The performance of U.S. indices year to date paints a grim picture: Nasdaq (QQQ) -33%, IWM (-23%), SPY (-20%), and DIA (−9%).
Returns for investors range from smaller profits to substantial losses, depending most likely on whether passive or active strategies are deployed and whether any funds are allocated towards alternative assets -- like commodities. Rigorous analysis and a trading plan are crucial to trading successfully in bear markets. Commodities are volatile, and it is essential to have stops and profit targets for commodity trades.
The chart displays the performance of Silver (SLV) at 26%, Sugar (CANE) at 12%, the Vanguard Value ETF (VTV) at 11%, Gold (GLD) at 9%, and the Vanguard Growth ETF at -3% over the last 90 days.
The S&P 500 began declining in early January and officially entered a bear market on June 13, 2022. Inflation, higher interest rates, and increased geopolitical tensions all contribute to persistent concerns in the present bear market and will continue in 2023.
At a glance
The early 2000s dot-com bubble led to the second-longest bear market in history, which lasted 929 days and a 49.1% decline.
The March COVID bear market in 2020 was the shortest in history, lasting 33 days and declining 33%.
Excluding the longest and shortest bear markets, the average length of a bear market is around 330 days -- or just under one year -- and more extended bear markets are closer to two years.
The average bear market drawdown is approximately 33%.
If today's stock market follows a similar time and price trajectory, the current bear market will last much longer than many people anticipate.
Market conditions and price action will ultimately decide whether the S&P 500 sees lows of 3300, 3250, 3000, 2900, or even lower.
The S&P 500 faces overhead resistance at 4,000, 4,100, 4,150, and, on overhead resistance, 5,000, which will be a number that will be hard to cross for a long length of time.
At MarketGauge, we take advantage of down trends and bear market rallies if we can profitably participate. Despite volatile financial markets this year, we are proud that many of our investments have held firm and have even grown. This provides confidence in our proprietary investment strategies and our ability to manage strategies for maximum returns while limiting drawdowns. And, fortunately, we have seen success with several strategies delivering positive returns despite these trying times. The chart below shows a recent sample of a few profitable trades.
On August 21, 2022, MarketGauge's Big View members were notified that value had surpassed growth as the outperforming strategy, and continues to lead the price spread (or ratio) of value over growth.
On August 30, 2022, Mish published "Smart investors know the importance of inflation protection".
Mish wrote a previous column, "Is Silver About to Outshine Gold?", on September 20, 2022.
As 2022 draws to a close, it's worth taking stock of several of her recent insights, Mid-September column highlights.
Mish has written extensively on sugar over the last several years. She recently penned an additional article on sugar, "This Commodity Will Sweeten Your Returns", in early December.
Rigorous analysis and a well-crafted trading plan are crucial to trading success in bear markets. It also helps to have multiple decades of trading experience at your fingertips and proven trading indicators to guide you.
As 2023 approaches, it is helpful to keep in mind the lessons of the past while focusing on executing risk-managed trades that are profitable today, like silver, as an example highlighted below.
If you're interested in learning more about how MarketGauge can help you trade with an edge, contact Rob Quinn, our Chief Strategy Consultant, who can provide more information about Mish's Premium trading service and other trading strategies we offer with a complimentary one-on-one consultation.
"I grew my money tree and so can you!" - Mish Schneider
Get your copy of Plant Your Money Tree: A Guide to Growing Your Wealth and a special bonus here.
Follow Mish on Twitter @marketminute for stock picks and more. Follow Mish on Instagram (mishschneider) for daily morning videos. To see updated media clips, click here.
Mish in the Media
In this appearance on Business First AM, Mish discusses why she's picking Nintendo (NTDOY).
Mish sits down with Gav Blaxberg for a W.O.L.F podcast on what she has learned as a trader and teacher.
In this appearance on Business First AM, Mish explains how even the worst trade should not be too bad with proper risk management.
In this appearance on Real Vision, Mish joins Maggie Lake to share her view of the most important macro drivers in the new year, where she's targeting tradeable opportunities, and why investors will need to keep their heads on a swivel. Recorded on December 7, 2022.
Mish sits down with CNBC Asia to discuss why all Tesla (TSLA), sugar, and gold are all on the radar.
Read Mish's latest article for CMC Markets, titled "Two Closely-Watched ETFs Could Be Set to Fall Further".
Mish talks the current confusion in the market in this appearance on Business First AM.
Mish discusses trading the Vaneck Vietname ETF ($VNM) in this earlier appearance on Business First AM.
S&P 500 (SPY):
380 support, 390 resistance.
Russell 2000 (IWM):
170 pivotal support, 180 resistance
330 support, 337 resistance.
269 support, 278 resistance.
Regional Banks (KRE):
53 support, 61 resistance.
Support is 205, resistance 217.
211 pivotal support, 222 now resistance.
130 is pivotal support, 139 overhead resistance.
57 pivotal support, 63 now resistance. Regained 60.
Director of Trading Research and Education