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How to Identify the Beginning of a Bear Market

Part of the Trading For Dummies Cheat Sheet

As you trade stock on the market, you need to know when the market is taking a downward turn — becoming a bear market. The signs in the following list indicate a bear market is approaching, so adjust your trading strategy accordingly:

  • Bear markets typically begin before the economy starts to decline.

  • Interest rates are rising.

  • Industrial production is starting to fall.

  • Basic material stocks, energy stocks, and consumer staples are performing well.

  • Weekly chart of S&P 500 shows lower highs and lower lows; the MACD (Moving Average Convergence / Divergence) line is below the trigger line and falling.

  • Bullish percent index indicator shows bear alert or bear confirmation pattern.

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