Monday, January 24, 2022

Why Bear Markets Are Tough

The number of traders who beat the indices soundly over both Bull and Bear markets are very few in number.

The Bear's broken clock is finally right. Those clock hands stuck at midnight--well, it's finally midnight.

Bear markets are tough, not just for Bulls but for Bears, too. Bear markets are treacherous because they are famously punctuated with rip-your-face-off rallies (RYFOR) that shred Bears' lavish profits and handsomely reward buy-the-dip Bulls.

Then the markets suddenly roll over to new lows and the anguished cries of margin-call-impaled Bulls rises eerily from the depths. Newly enriched Bears--the few who weren't thrown off the Bear Bus by the repeated RYFORs--rejoice, only to be ejected from the Happy Seat by the next rip-your-face-off counter-rally.

Those playing both sides are wrung out by the churn, and while a few make fortunes, the majority are whipsawed off the Bear Bus and the Bull Bus by the volatility and the soul-crushing anxiety of being wrong yet again.

Bear markets excel at sucking in Bulls at the peaks and Bears at the lows. When the move you've been praying for finally manifests, the temptation to go all in and reap the gains for being right is irresistible.

Right when greed triumphs, the market reverses and fear rushes in to crush the euphoria. Bears may know they're right over the long term, but it's dishearteningly difficult to stay the course as profits vanish in rallies and the really big crash that mints fortunes remains maddenly elusive.

Bulls see every support level and bit of good news as the much-anticipated turning point where the bad news and the decline finally end. But the turning point is just as elusive as the penultimate capitulation crash. Everyone wants a clear signal that the Bear market is over and the moment to buy, buy, buy is finally at hand.

But Bear markets aren't quite so generous. The Bear is generous with false signals, false bottoms and false rallies, and remarkably stingy with the-real-deal, this-is-it capitulations.

All the confidence gained in long market melt-ups where buy-the-dip paid off 100% of the time is slowly eroded by Bear markets. Buy the dip works for a few hours or a few days, but only the nimble reap the gains. Those playing with leverage find the gains from 10 successful trades are erased by one trade that got away.

The Bear loves to toy with hope--hope for a turning point, for vindication, for capitulation and for life-changing profits. The Bear market loves teasing not just the vulnerable roller-coaster-riding emotional traders but also the pros and even the algo-trading machines.

The teeming hordes who beat the indices in the Bull market are reduced to a handful of stragglers in the waning days of a Bear Market. Napoleon's decimated, starving remnants of a once-great army hobbling out of Russia come to mind.

The number of traders who beat the indices soundly over both Bull and Bear markets are very few in number. Bull markets are easy, Bear markets are hard. They require an entirely different experiential skillset than buy-the-dip Bull markets.

Looking back with the luxury of hindsight, Bear markets look like Paradise for the active trader: look how much moola could have been reaped by buying low and selliing high, again and again and again.

Easier said than done, as my chart of the Anatomy of a Bear Market illustrates. What's easy is being whipsawed and thrown off the bus.

That grizzled old wreck of a trader who mumbles incoherently about the 70s, 1987, 2002 and 2008? Listen to the ramblings, and ponder the runes and wanderings of the shattered mind. Therein lie the secrets to emerging not as a shell-shocked survivor but as the rare victor.




My new book is now available at a 20% discount this month: Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $8.95, print $20)

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.



Recent Videos/Podcasts:

Charles Hugh Smith: Move Out Of The Unraveling City BEFORE Economic Collapse (1:02 hr)


My recent books:

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $25) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($5 Kindle, $10 print, ( audiobook): Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 Kindle, $8.95 print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 Kindle, $15 print)
Read the first section for free



Become a $1/month patron of my work via patreon.com.




NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, Gerard H. ($50), for your marvelously generous contribution to this site -- I am greatly honored by your support and readership.

 

Thank you, John M. ($5/month), for your most-excellently generous pledge to this site -- I am greatly honored by your support and readership.


Thank you, Robert S. ($5/month), for your superbly generous pledge to this site -- I am greatly honored by your support and readership.

 

Thank you, Emily J.-R. ($5/month), for your supremely generous pledge to this site -- I am greatly honored by your support and readership.

Terms of Service

All content on this blog is provided by Trewe LLC for informational purposes only. The owner of this blog makes no representations as to the accuracy or completeness of any information on this site or found by following any link on this site. The owner will not be liable for any errors or omissions in this information nor for the availability of this information. The owner will not be liable for any losses, injuries, or damages from the display or use of this information. These terms and conditions of use are subject to change at anytime and without notice.


Our Privacy Policy:


Correspondents' email is strictly confidential. This site does not collect digital data from visitors or distribute cookies. Advertisements served by a third-party advertising network (Investing Channel) may use cookies or collect information from visitors for the purpose of Interest-Based Advertising; if you wish to opt out of Interest-Based Advertising, please go to Opt out of interest-based advertising (The Network Advertising Initiative). If you have other privacy concerns relating to advertisements, please contact advertisers directly. Websites and blog links on the site's blog roll are posted at my discretion.


PRIVACY NOTICE FOR EEA INDIVIDUALS


This section covers disclosures on the General Data Protection Regulation (GDPR) for users residing within EEA only. GDPR replaces the existing Directive 95/46/ec, and aims at harmonizing data protection laws in the EU that are fit for purpose in the digital age. The primary objective of the GDPR is to give citizens back control of their personal data. Please follow the link below to access InvestingChannel’s General Data Protection Notice. https://stg.media.investingchannel.com/gdpr-notice/


Notice of Compliance with The California Consumer Protection Act


This site does not collect digital data from visitors or distribute cookies. Advertisements served by a third-party advertising network (Investing Channel) may use cookies or collect information from visitors for the purpose of Interest-Based Advertising. If you do not want any personal information that may be collected by third-party advertising to be sold, please follow the instructions on this page: Do Not Sell My Personal Information


Regarding Cookies:


This site does not collect digital data from visitors or distribute cookies. Advertisements served by third-party advertising networks such as Investing Channel may use cookies or collect information from visitors for the purpose of Interest-Based Advertising; if you wish to opt out of Interest-Based Advertising, please go to Opt out of interest-based advertising (The Network Advertising Initiative) If you have other privacy concerns relating to advertisements, please contact advertisers directly.


Our Commission Policy:

As an Amazon Associate I earn from qualifying purchases. I also earn a commission on purchases of precious metals via BullionVault. I receive no fees or compensation for any other non-advertising links or content posted on my site.

  © Blogger templates Newspaper III by Ourblogtemplates.com 2008

Back to TOP