When Does a Bear Market End?
A bear market can be brutal. Stocks tumble, fear grips investors, and many wonder—when will it end? As traders, we want to time the recovery correctly. But how do we identify the turning point of a bear market?
1. The Classic Definition and Recovery
A bear market is typically defined as a 20% decline from recent highs in major indices like the S&P 500 or Nifty 50. However, the real question is: What signals the end?
A bear market officially ends when the index rallies 20% from its low, but waiting for this confirmation often means missing strong early gains. Instead, traders should look for signs of accumulation and trend reversals.
2. Signs That a Bear Market is Ending
A. Bottoming Patterns Appear
- Double Bottoms & Rounded Bases: Markets form structures where previous lows hold, indicating seller exhaustion.
- Higher Lows: Instead of making new lows, stocks start forming higher lows, signaling a shift in momentum.
B. Market Breadth Improves
- More stocks participate in the rally—the percentage of stocks above the 50-day moving average rises.
- Advance-Decline Line turns positive, meaning more stocks are gaining than losing.
C. Institutional Buying (Smart Money Flow)
- Volume spikes on up days: This indicates institutional accumulation.
- Big leaders emerge: Strong growth stocks start breaking out of bases despite negative sentiment.
D. Moving Averages Signal a Reversal
- The 50-day moving average crosses above the 200-day (Golden Cross)—a strong bullish signal.
- Indices reclaim their 200-day MA, showing renewed strength.
E. Sentiment Reaches Extreme Fear
- Bear markets often end when everyone is pessimistic. The CNN Fear & Greed Index or Put/Call ratios reaching extreme fear levels can indicate a bottom.
3. Macro Catalysts That Trigger a Reversal
- Interest Rate Cuts: When central banks pivot from tightening to easing, risk assets rebound.
- Earnings Recovery: Stocks move ahead of fundamentals, but improving earnings help sustain the rally.
- Geopolitical Stabilization: If uncertainty fades, markets regain confidence.
4. The Smart Trader’s Approach
- Watch Leadership Stocks: The strongest stocks in a new bull market start moving before indices bottom.
- Build Positions Gradually: Instead of trying to time the absolute bottom, enter with smaller positions and add as confirmation builds.
- Follow Price Action, Not News: By the time good news appears, the market is often much higher.
Final Thoughts
Bear markets test patience and discipline, but they also present the best opportunities. The key is to recognize the shift early and position accordingly. Are you ready for the next bull market?
A bear market can be brutal. Stocks tumble, fear grips investors, and many wonder—when will it end? As traders, we want to time the recovery correctly. But how do we identify the turning point of a bear market?
1. The Classic Definition and Recovery
A bear market is typically defined as a 20% decline from recent highs in major indices like the S&P 500 or Nifty 50. However, the real question is: What signals the end?
A bear market officially ends when the index rallies 20% from its low, but waiting for this confirmation often means missing strong early gains. Instead, traders should look for signs of accumulation and trend reversals.
2. Signs That a Bear Market is Ending
A. Bottoming Patterns Appear
- Double Bottoms & Rounded Bases: Markets form structures where previous lows hold, indicating seller exhaustion.
- Higher Lows: Instead of making new lows, stocks start forming higher lows, signaling a shift in momentum.
B. Market Breadth Improves
- More stocks participate in the rally—the percentage of stocks above the 50-day moving average rises.
- Advance-Decline Line turns positive, meaning more stocks are gaining than losing.
C. Institutional Buying (Smart Money Flow)
- Volume spikes on up days: This indicates institutional accumulation.
- Big leaders emerge: Strong growth stocks start breaking out of bases despite negative sentiment.
D. Moving Averages Signal a Reversal
- The 50-day moving average crosses above the 200-day (Golden Cross)—a strong bullish signal.
- Indices reclaim their 200-day MA, showing renewed strength.
E. Sentiment Reaches Extreme Fear
- Bear markets often end when everyone is pessimistic. The CNN Fear & Greed Index or Put/Call ratios reaching extreme fear levels can indicate a bottom.
3. Macro Catalysts That Trigger a Reversal
- Interest Rate Cuts: When central banks pivot from tightening to easing, risk assets rebound.
- Earnings Recovery: Stocks move ahead of fundamentals, but improving earnings help sustain the rally.
- Geopolitical Stabilization: If uncertainty fades, markets regain confidence.
4. The Smart Trader’s Approach
- Watch Leadership Stocks: The strongest stocks in a new bull market start moving before indices bottom.
- Build Positions Gradually: Instead of trying to time the absolute bottom, enter with smaller positions and add as confirmation builds.
- Follow Price Action, Not News: By the time good news appears, the market is often much higher.
Final Thoughts
Bear markets test patience and discipline, but they also present the best opportunities. The key is to recognize the shift early and position accordingly. Are you ready for the next bull market?
Telegram - @bazaarpulse
t.me/bazaarpulse
t.me/bazaarpulse
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Telegram - @bazaarpulse
t.me/bazaarpulse
t.me/bazaarpulse
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.