«Curious minds want to know.»

Traders,

At Thursday’s lows, the S&P 500 was -19.7% off its highs. Wall Street says it’s an official bear market if we’re down 20%. Close enough, I say! Besides, the Nasdaq and Russell 2000 and most sectors entered bear territory long ago. Tack on the implosion in growth stocks and a host of recent IPOs, SPACs, and other degenerates, and the evidence is overwhelming.

But here’s the thing. There are two types of bear markets. The first is more vicious, runs deeper, and lasts longer. The second is shallow and brief.  It all comes down to the economy. A recession always accompanies the nastier downturns.

Which version we’re experiencing now comes down to whether we can avoid a recession. If you think the Fed will go too far and sacrifice the economy to kill inflation, you’re betting on this being one of the bad ones.

Alternatively, if you think the Fed will be nimble enough to curb inflation while not completely torpedoing the economy, you’re banking on this being one of the good ones (in a less bad way). 

Only time will tell, but I’m certainly hoping that the worst part of the decline is over. And indeed, it is if this ends up being the second type of bear.

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Video of the Day: How to Prep a Bearish Swing Trade

Explanation of how professional traders set up and prep a #bearish #swingtrade. They walk through entry stop and targets, as well as how they find each.

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Chart of the Day: Two Types of Bear Markets

According to Ben Carlson, here’s the breakdown of all the bear markets in the S&P 500 since 1928. There’s been 25 in total. 14 occurred with a recession, and 11 occurred without one.

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Today’s line up

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