Bear market behavior is upon us. And the S&P 500 sitting only 10% off its highs doesn’t tell the real story. But if you have a widespread watchlist, you already know that. I saw a stat today that more than 50% of the S&P’s 500 stocks were already down more than 20% from their highs.

If it walks like a bear and talks like a bear…

I could throw out some other signs confirming the deteriorating market, but why bother? The fact that every major stock index is now submerged beneath all moving averages should be evidence enough.

Here’s the question I’ve been mulling over though: What if this isn’t the beginning of another drag-out bear market? What if instead, we’re nearing the end of this particular corrective episode, not the beginning? Maybe an economic recession is still a couple of years out and not imminent. Maybe the trade war thaws. Perhaps the Fed proves much more dovish moving forward.

The doom and gloom machine is running hot – perhaps too hot. And I’m just wondering about what happens if the market gods turn it off for a spell. I know smart people who seem to be getting more and more bearish the further the market falls. But on the other hand, I know other equally intelligent people who contend the end of the bearishness is nigh, and we could see substantial gains over the year ahead.

They both can’t be right.

In the Bear Market Survival Guide, I outline the difficulty of investing during a bear market. Buy too early, and you run the risk of getting flattened by the selling stampede. Buy too late, and you might miss the juiciest – not to mention quickest – part of the inevitable recovery.

The solution we settled on in the system was scaling-in. That is, buying in increments to give yourself multiple chances to invest near the eventual bottom.

What would that look like right now? As I see it, we have a few choices. Let’s assume we’re looking to buy a market index like IWM which is now 17% off its highs.

3 Choices

First, we could wait for a definitive bottoming pattern to form and then buy. The pro is we have some confirmation that support has been found and a new uptrend is forming. The con is we may be buying well above the actual low. For example, today’s low in IWM was $141.45. We would have to rally above $155 at least for a new uptrend to emerge. Missing the first 10% gain of the recovery is annoying. But, hey, maybe it’s not as big a deal as it seems in my head.

Second, we could go all-in now. Historically, if you bought when the market was almost 20% off the highs, it turned out being a great buying opportunity one to two years later. The pro is if we nailed the low and IWM rips to $155 on its way back to the highs sometime next year then you’ll participate in the lion’s share of the gains. The con is maybe your a dunce, we don’t bottom, and IWM ultimately heads down to $100 (a 42% decline) before the bear has finally been vanquished.

Third, we could heed the wisdom outlined in the Bear Market Survival Guide and buy in increments. If you buy some now and this is the bottom, then you get to at least partially participate in the upside action. If IWM ends up declining 30%, 40%, or more before finding a low, then you can buy more along the way to lower your average cost. This sets up a potential win-win.

Which door would you choose?