Market Cycles within a Bear Market | Podcast Episode #57

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Learn to trade, stocks successfully, learn to profit consistently. I’m Ryan Mallory and on my weekly podcast, I’m going to teach you the in and out of a complex ever-changing stock market. You will learn to trade better trait smarter and profit bigger.

0:26
Now let’s go trade everybody. This is is Ryan. Mallory doing another episode. Let’s let’s talk about the market Cycles inside of a bear market so off. Okay, so last week I talked about the market Cycles within a bull rally this time it’s going to be the market Cycles within a bear market so often but if you haven’t listened to the podcast from last week I definitely would take a listen to it and it’s the thing is that the market Cycles when the bull rally versus a bear sell off, their not the same in terms of Like, you can just flip it over and it looks, you know, the same for the for the bear Market.

1:04
It’s not. It’s going to be completely different, there’s a lot different Dynamics, the market always likes to take the stairs up in the elevator down and so when you have an actual cell off, there’s gonna be a lot more Panic. It’s going to be a lot more harder’s price action. It’s going to be a lot more exasperated for the people to trade as there’s a lot more emotions too.

1:23
Except I feel like the fear emotion is a lot stronger than that greed. Emotion. I’m going to be honest with it, doing this podcast is going to be nuts because I I’m in downtown area here in, bro. My office is at I’m trying to do it. I got freaking motorcycles outside their revving, their engines. I got a Puerto Rican protest, on the other side of the building, I don’t even know what they’re talking about Dave.

1:42
Got like they’re holding their science like a four-man protest, and they’re holding signs that that are in Spanish. So I have even no idea what they’re protesting or if I would even want to support it because I don’t speak Spanish, I would say probably like ten percent of the people. If if that meat probably like five percent I don’t know.

1:59
I took four years of – I don’t even know how to speak hardly a sentence that Spanish okay between high school and college, I just don’t know it. So I don’t know. I mean I I feel like you know, might help if it was translated or something because I don’t think anybody’s going to understand it, but any case you got that you got to protest, you know about something regarding Puerto Rico.

2:21
I don’t know, it’s just, it’s just weird out there. I just went and grabbed myself a slice of pizza and came over here to do this and it was, It was kind of weird but let’s get back to it. Okay, let’s, let’s Back to the market cycles and side of a bear Market sell-off the first, okay. So what usually precedes these kind of major sell-offs is a slow trickle.

2:41
Higher, you’re having the market that’s moving up. It just seems like it’s going to move up forever, but it’s not music moving up in huge increments. It’s like, it’s like 12 points. It’s low volume. It’s a lot like what we’re seeing right now, but the markets just like moving up in very small increments.

2:57
The volumes extremely low. I mean we’re having some of the lowest volume we’ve seen in New Year’s right now. And that’s, that’s pretty typical of what you see in the later stages of a rally. Because you’re sitting at all-time highs, you can’t find any new buyers. And so now all of a sudden, it’s like where are we going to find a man you can’t.

3:13
And So eventually it just runs out of buyers. It runs out of people that are willing to push the market to new all-time highs and it comes crashing down on himself. Now you can stay in this range for months and months and months. So we’ve been seeing this for like, maybe, like the past month or two, it could go on, it could go on for the rest of the year.

3:31
It could maybe only go. For a couple more weeks, I don’t know, but you want to know that the conditions are setting up for an eventual cell off. So you have that you have the slow trickle, higher on low volume. But then you have this notable price change to the downside, you start seeing the volume pick up a little bit.

3:50
So when I say notable price change to the downside, you see in the bull market you have sell-offs but they don’t tend to last long and they don’t tend to be that deep. They tend to be more like of a bull flag type pattern where the sell-off a shallow and nature, where the S&P 500 might go up 60 or 70 points over a course of a few days.

4:11
And then it starts to have a pullback of maybe like, 10 to 15 points over the over two or three days. That’s not really anything to get nervous about. It’s on low volume. The the depth of the price movement is is not that much, but when you start hitting a market top, you start seeing the depth that the price range to the downside.

4:31
It’s increasing and like I said, the volume is picking up, but then you start to all of a sudden, get these massive sell-offs to the downside. We’re talking about, on the Dow, like, three, four, five hundred points on the S&P.

4:46
SP it’s going to be 30 40 or 50 points. It’s notable. It’s big, it’s scary. And that’s where you start seeing the above average volume start to kick in. It’s like holy cow. Like, what what’s this market doing? Something is changing here, but not everybody’s that worried about it yet. People are still think, okay, we were probably do for this, the market need to cool off.

5:04
Yeah, we needed. We needed to take some profits a little bit, but there is something fundamentally changing underneath the surface. There’s some more fear, there’s more panics that are starting to In. And on the days that were, there is a market rally, the market rallies on below, average volume, so it’s still not gaining, a lot of interest from people on the street that are willing, to pick up stocks on the discount but even more.

5:25
So the dips are not being bought intraday, they’re not just not a lot of times in the bull market, you’ll see these rallies, and then we have the sell-off. Let’s say we sell off 20 points, then all of a sudden by the end of the day, we’re only down three points. But in a bear Market, when that bear Market starts to pick up, those dips are not getting picked up.

5:42
They’re not being I’m bot. So, the whole be tfd deal. Yeah, they’re that crowd, they’ve gone to the Hamptons for the weekend. So these dead cat bounce, is that happen along the way. After this major sell-off, you get a dead cat bounce. A lot of people start getting excited and see they’re like, oh this is the bottom. This is the bottom it by the market will rally for two or three days, maybe even a week.

6:03
But but they’re not making any Improvement to the technicals of the picture. They’re probably not in most cases even making a higher high. That I mean the sell-off that we saw back in October November and December. When we had a dead cat bounce in late October, and then again, in November, it got right up to the point of where it almost made a higher high but it didn’t it’s sold right back off so it can’t make the higher highs.

6:26
And if it does then it quickly you know cells off right there after and then the dead cat bounce is over and the extreme Panic starts to set in. Okay, you’re getting new cell all flows. You’re starting to see, you’re not just seeing like three or four hundred points to the downside.

6:41
You’re starting to see six seven eight hundred points to the downside. You got people crapping their pants because it’s happening on a regular basis. There are seeing over a Year’s worth of profits or a couple of years, worth of profits, just disappear. Again, if you look back at quarter for of October, November, and December of last year, you had a huge sell-off there in 2018 that last quarter.

7:03
You had tons and tons of selling that that took the market almost wiped out. All of the 27 prophets, 2017 profits from the Trump election. So you start having to worry a lot, people are panicking. The reason why I know is because all of a sudden, the people have never taken an interest in what I do for a living and that is the stock market, all of a sudden they’re calling me for the first time.

7:24
They’re saying, hey, But what do you think about the stock market? If I post a video on Facebook about what the stock market’s going to do, it’s going to get some of the highest views of the year. That’s because the worry and the Panic is selling setting in and people are like, really wanting to know. What do I do?

7:39
What do I do? Do I sell everything. Am I going to lose it all? And then what’s even more interesting is during this time period, that prior to this point where the markets have in this extreme, sell off the utilities, and the Staples are usually always the safe haven where people are.

7:55
Flowing into the utilities and Stables because they are your you’re safe, sectors. There are the ones where even if the market went to crap, people would still need water. People would still need power. They’d still be buying that stuff. Staples people are still buying toilet paper. People are still needing, you know, TV dinners, at the very least or ramen noodles.

8:13
So those those kinds of staple stocks, they’re going to get bought. So those sectors tend to weather the storm pretty good. But in that last stage they don’t they get slaughtered to because everybody’s looking to sell everything. They just throw in the towel, utilities. Spared the Staples are not spared. Real estate’s, not spare telecoms.

8:28
Not spared. Those are your four sectors that tend to do pretty good in the early stages of a market self? But they get they get slaughtered. Now when do I start to get interested in buying stocks? It’s when this extreme Panic is setting in. Now I have an indicator that I use is called the T 2108.

8:44
It’s through TC 2000’s charting platform. You can go on my website, on the, on the front page and you can sign up for a free trial of it through their charting platform. But any case They they have this indicator that measures the percentage of stocks trading above their 40-day moving average.

9:01
Like right now with the market at all-time highs, it has been between about, you know, 60 to 70%. Now, when the extreme Panic hits in, you’re seeing like readings of like three and four percent, you’re seeing some really, really bad number. So when that thing gets below 5%, sometimes it may only be 10% but five percents really?

9:20
Like the the the spot to aim for it. That’s when you want to start getting interested in buying stocks because the stocks really can’t go any lower again. The sell-off from back in late, December on December, 26, we were seeing a reading of like 3% of stocks or trading above their 40-day moving average. That is extremely extremely strong and usually leads to a big Market reversal from there.

9:40
For me. I added some long-term Investments to my portfolio at that time Facebook apple. And they did they’ve been doing phenomenal. I mean they’re uh you know 40% so I can’t complain. But those are the stages there’s those are stages, you have the slowed, the slow trickle higher and then the notable price range to the downside expanding.

9:58
Then you have major sell-offs then you get the bounces aren’t necessarily happening. Like what we’re used to seeing on an intraday basis that dips aren’t being bought. Then you have the dead cat bounce that maybe only last two or three days to a week then followed by a new sell-off that breaks the previous lows.

10:15
You get extreme panic. And then while are you all of a sudden have you’re buying opportunity because you have an extreme amount Out of stocks that are just treating well below the moving averages, particularly the 40-day moving average, where you’re only having like three or four percent trading at or above their, their 40-day moving average.

10:31
And all of a sudden, you’ll see the people start getting interested in buying stocks again. Now, October, November and December. That, that took three months to play out there. Sometimes it takes a year like, 2008, you just never know. But any case, I’d be remiss if I didn’t mention the swing trading Splash, don’t guys.

10:48
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11:05
But now he just, just because of me or my trading stock picks, it’s the community of traders in there because they’re pointing out stuff that I’m not seeing either. They’ll, they’ll point out a good stock that it just completely went under my radar. I didn’t see it. And so they’ll they’ll It to my attention before, you know it I’m trading one of their their picks, it’s a really good place.

11:24
I highly recommend it so it’s a yeah, it’s just an awesome place. If you have any questions, feel free to email me ryan@shareplanner.com and I hope you guys have a have a great day. God bless, thanks for listening to this week’s podcast That Swing trading with Ryan Mallory. I’d like to encourage you to join me in the SharePlanner Splash Zone where I navigate the financial markets every day with Traders from around the world.

11:47
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12:06
And follow me at SharePlanner on Twitter and on SharePlanner’s, Facebook page, where I provide unique market, and trading ideas every day. If you have any questions, please feel free to email me ryan@shareplanner.com or call the office at 3:00. Three, two, one, five, two, two six, seven, three, three all the best to you and God bless.