Bear-market rallies are nothing new.

They provide moments of hope and opportunity during otherwise trying times.

People can make a pretty penny, too. I’ve seen plenty of people make 20% returns on their portfolios in a matter of weeks.

Of course, the elephant in the room is that a bear-market rally is not a bull market. Those gains are short-lived, so you better know when to exit.

Thankfully, I’ve got the pulse of the market, and this current bear-market rally is no match for my technical indicators.

Even better, I’ve got two sectors directly in my crosshairs — I’m just waiting for the signal to set the plan into motion.

But we’ll get to those in a second.

For what it’s worth, the last two real bear markets came back in 2000 and 2008.

During the 2000 bear market, there were a total of four bear-market rallies. Among those four, the average gain was 18.98%.

Those rallies lasted anywhere between six and 14 weeks.

In 2008, there were three bear-market rallies.

Those rallies averaged a gain of 16.6% over periods of time ranging six-to-nine weeks.

Astute readers will notice something important. The rallies are getting shorter.

Now, let’s put away our history books and look at this modern-day bear market.

As of now, we’ve had three separate rallies resulting in gains of 13%, 18%, and – most recently – 19%.

Assuming this current bear-market rally has run its course, those rallies lasted five, nine, and seven weeks.

So, we’ve seen the average bear-market rally length go from 11.6 weeks in 2000, to 7.3 in 2008, to 7.0 in 2022.

But the thing that’s most important is, in this last rally, we’ve got two huge issues that those previous two bear markets didn’t face.

For starters, you’ve got inflation running rampant. But as a result, you’ve also got The Fed hiking up interest rates for the foreseeable future in hopes of getting inflation under control.

For the years leading up to our current inflationary predicament, we had been doing figurative upside-down keg stands in celebration of all of the free money.

(That’s how I met my wife all the way back in 1991, by the way. The keg stands – not the free money. But that’s a story for another day.)

So, The Fed is trying to put the inflated genie back into the bottle instead of having all of their usual tools at their disposal. You know, like lowering interest rates and adding liquidity to the market.

The other difference with this bear market is the sheer volume of people trading.

Think about it – practically everybody walking around with a smartphone has a stake.

So, when we look at this market and it turns around like this, it’s because the traders are rolling it over. The traders are getting nervous, and they know that these bear-market trends exist.

Some of those traders may be (falsely) assuming that since we hit our third bear-market rally – the same amount as in 2008 – that we are now at our bear-market bottom.

I’m here to tell you that you can’t start calling a bear-market bottom just because you’ve got something that’s normally part of that trend.

This whole inflationary fiasco – and the Fed’s corresponding response – makes this bear market a different beast altogether.

So, to the real meat of the discussion – our plan of action.

There’s one sector in particular that I want you to watch right now – banking.

Banks are the leaders when you start running into true recessionary conditions. Historically, the financials are the thing that’s going to lead.

But that’s not the only loser in this equation. When the banks start falling, technology is going to go down with it – it’s super inflated at the moment.

And, you’re getting all types of signs from the banks that they’re going to start pre-announcing earnings soon. So, be on alert.

This isn’t me just beating up on a couple of sectors for the heck of it. This is common sense. Putting the pins in the numbers and reading in between the lines.

Those numbers have been telling me that the financials are going to take some damage, and that’s starting to happen right now.

So, allow me to repeat, we have not hit our bear market bottom yet.

Tomorrow is the beginning of an important string of events that could send shockwaves and turn this into a self-fulfilling market.

With the PPI numbers coming out tomorrow morning, the CPI numbers set to be announced Tuesday morning, and then Tuesday and Wednesday are when the FOMC meetings take place.

If the PPI and CPI numbers come in hotter than usual, all of that Fed discussion about pulling back on rate hikes to 50 basis points could be dashed.

People are sitting here, watching, waiting, feeling like, “Uh oh, here we go again.”

On top of all of that, the Fibonacci discussions we’ve been having around the Invesco QQQ Trust Series 1 (QQQ) are another thing that could spur this self-fulfilling movement.If we see rejection at the 50% retracement – $287.56 – then traders will start selling out the wazoo and send this market tumbling even further.

Remember. Four bear-market rallies in 2000, three in 2008, and we’ve got three now amidst the worst macroeconomic conditions of any of them.

Bear with me, guys. No pun intended.

We’re going to do well during all of this. We’ve just got to be a little patient.



Notify of
Inline Feedbacks
View all comments