We are at the end of a bear market, which is both good news and bad news. Indices may not decline too much in the coming months, but it takes a while to recover from a bear market. The bulls are going to find it challenging to make any upside progress.
Right now, markets are trading in a range between 3800-4200. Until action breaks through those support levels, respect the range. It is still a bear market environment.
The VIX (volatility index) portrays a high level of complacency; traders don’t think that markets can/will go down. With the VIX sitting at 17%, it is the lowest weekly close since Nov 2021.
The Nasdaq, which is the strongest index so far in 2023, only has 46% of its issues above the 20 day moving average. The last month of trading has not been good for most issues in the index, yet the Nasdaq has been ripping higher – thanks to the top five to seven names.
How to manage the end of a bear market
With the markets firmly in the bull camp (at least in the short term), it’s good to look back at 2022. Remember all the times the bear market took a swipe at the bulls?
And remember how many times the media noise has gotten loud? Once again, the chatter is frequent, the cheering is loud, and the FOMO (fear of missing out) crowd is antsy. Don’t submit to the pressure to jump in feet first! Markets are not meant to be chased higher – it will lead to a disastrous outcome (eventually).
To manager the end of a bear market, this is what you need to do:
- Pay attention to the technical indicators, especially price action and volume. Watch the sentiment indicators, money flow, oscillators, and internals as well.
- Ignore those who are saying, “Its a bull market, don’t miss it!” These are cries of those who lost money in 2022 and are desperately trying to break even in 2023.
Remember, the indicators will always give you the best information about whether it is time to get in or not.