1, 2, 3, 4, I declare a TRADE WAR. Yeah, I know I already did, but like, let’s do it again, because it’s May and why not? – Sir Trump

Monday was a nasty pill for bulls to swallow for multiple reasons. But maybe the meanest was the upending of Friday’s picture-perfect bullish reversal candle. I mean, to gap below last week’s low, right off the bat? That’s some next level nastiness.

We had a textbook VIX spike reversal play going and the tit-for-tat tariff game just couldn’t chill for a few days to let it play out. What a shame. If you don’t know what I’m talking about then go listen to last week’s Cash Flow Club. Now the market’s entered sloppy territory and we don’t even have an extreme VIX reading to fade. Boo.

And while I’m in the foul calling mood, how about that totally unnecessary IWM breakout over $160 on May 3rd and 6th to suck in buyers TWICE! before plunging into the abyss.

So now that we have a bona fide support break on our hands, not to mention a headline driven market with gap surprises lying in wait, what’s a good little trader to do?

The answer, as always, is it depends. But here are a few ideas to chew on.

Fighting Bears

While we are a far cry from a full-fledged bear market, the short-term trend for most indexes has turned lower. How far it falls is anyone’s guess, but the market has turned from “innocent until proven guilty,” to “guilty until proven innocent.”

Here are five ways to pivot.

First: if in doubt, sit out. There isn’t any shame in chilling on the sidelines until the dust settles. Keeping your powder dry while others bash their heads against a wall trying to game noise is smart, not cowardice.

Second: Embrace your inner bear. You have one in there somewhere. He knows how to spot bear setups and deploy bear strategies. The time to unleash the beast is when the market’s short-term trend turns lower (like now!)

Third: Reduce size. If treacherous, gap-ridden, headline-driven markets aren’t your fave, then join the club. Maybe while the ride lasts you start risking 1/2 as much per trade. If you’re normally risking $200, start risking $100. That way you’re still in the game, but not making large enough wagers to torpedo your portfolio.

Fourth: Take profits quicker. If gaps continue to pocket the landscape you can bet today’s gains may be gone tomorrow. So don’t get lazy. Instead, ring the register when the profit fairy visits. If you’re afraid you’ll miss out on bigger gains, then you can always take partial profits.

Fifth: Scale in. I’m always a fan of this tactic, but especially so in environments where volatility is wicked. That way you can use the adverse moves – which are now much more likely – to your advantage by entering the rest of your position at better prices.

Alright. There you have it. Five tips to fight the bear.

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