February 19, 2022, 9:49 pm EST
Bear Market Mentality
Mentality makes you ready for the coming events. If you have the correct mentality for the future, then you are ready to face the reality without much surprise. Not only you could reduce the potential loss, but maybe you can take advantage of the changes. Obviously, it is so true for the investment with the financial market.
At this moment major indexes are still far away from the definition of a bear market that is down -20% from the high. But, there are many unusual signs to show that the bear market might be here implicitly already.
Breakdown of Stock Performance
There are many stocks (>10 billion market caps) that are down -30% or more in a few months: AFRM, RBLX, SHOP, GRAB, HOOD, DOCU, ETSY, DASH, ROKU, LCID, DID, PLUG, ZM, BILI, PLTR, RIVN, ENPH, PINS, PYPL, BNTX, YNDX, MRNA, TWLO, TDOC, COIN, NFLX, SPOT, CFLT, FB, NIO, HUBS, CHWY, UPST, LULU, CRM. Definitely, this is a major warning signal and symptom of the bear market.
Poor Breadth Pictures
Compared to 90% of stocks are above their corresponding 200 day-moving-average February 2021, it is only 30% now. It means that the majority (60-70%) of stocks are below their long-term trend line. Please refer to our 11/24/2021 article for more details.
All Indexes Underwater
Dow Jones, S&P 500, and Nasdaq are all underwater (below their 20, 50, 200 day-moving-average lines). Technically, none of them can breadth.
Thus, we do not need to know what is happening in Russia-Ukraine, how may rate hike this year, or how high will be the inflation. The stock market itself already revealed enough hints that the bear market is on the way or might have arrived. Thus, it is essential that we need to have a bear market mentality so that we will prepare for it. Doing so will help us to accept the fact that there could be a lot more downtrend to go without surprising us.
Finally, we will publish another article with the title “Bear Market Strategy” to talk about what we should do for the bear market.