How to Identify the Beginning of a Bear Market

By Lita Epstein, Grayson D. Roze

Part of 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.

  • The weekly chart of the S&P 500 shows lower highs and lower lows; the MACD (moving average convergence divergence) line is below the trigger line and falling.

  • The bullish percent index indicator shows a bear alert or a bear confirmation pattern.