The conventional definition of a bear market is a drop in the major indices from recent highs of 20% or more. This makes for quick calculations and makes it easy for editors to write headlines. The history of this definition is murky but it is now the most common way for the general population to determine if the market is 'good' or 'bad'.
Like most things in the market, this simplistic approach doesn't work very well. According to this definition, there has not been any meaningful bear market since the indices hit bottom during the 2008-9 recession. The reality is that there have been bear markets in almost every sector of the market and every stock during the past decade. Even leading stocks like Apple (AAPL) and Facebook (FB) have suffered through bear markets several times in recent years.
Currently, there is more bear market action under the surface of the indices than there has been in a while. One of the most apparent bear markets right now is in stocks that have had recent IPOs. The very poor action of Peloton (PTON) yesterday helped to bring this to the forefront and resulted in one upcoming high-profile IPO being canceled. That is the sort of thing that happens when bear markets are recognized.
IPOs aren't generally thought of as a market segment since there are a wide variety of industries involved but it has mainly been very high-growth stocks with little or no earnings that have suffered the most recently. Uber (UBER) , Pinterest (PINS) , Slack Technologies (WORK) , etc,. are in their own little bear markets and are totally disconnected from the indices that are still within a few percentage points of their all-time highs.
There are other areas of the market suffering as well. Recently, software and cloud stocks were hit hard as money suddenly rotated into 'value' names. Biotechnology has been slammed and oil-related names can't find any traction despite the destruction of a major supply of oil in Saudi Arabia. Last night Micron (MU) issued poor guidance and now the semiconductor group is at risk of becoming the next group that sees an outflow of money
Some of the worst bear market action has been occurring in small caps. The Russell 2000 ETF (IWM) has been underperforming since it topped in September 2018 and there has been some massive destruction in many of the highly speculative names.
Most of the folks in the business media blissfully overlook what is going on. What fools them is that they see the indices which are being held up by the constant headlines about a potential deal with China on trade. Shorts are unable to attack the indices because of this headline risk so they go after various sectors and individual stocks instead.
It is much safer for short sellers to go after expensive IPOs rather than to try to short the S&P 500 that will pop on any meaningless headline about China.
The dilemma of the market right now is that there is widespread poor action under the surface but it is hidden by the major indices that are so highly reactive to headlines about China and central banks.
To navigate this market effectively the focus has to be on individual stocks that you are holding. They can destroy your account while you watch the indices barely move. Don't neglect your discipline. Use stops and money management regardless of what the indices might be doing.
Keep in mind that the end of the third quarter is upon us and there will be more rotational moves being made by big funds. This action tends to be highly 'inefficient' as far as pricing and that may be good for new opportunities.