Ask any trader that's been doing this for a while, bear markets offer the best bounces.
The immediately argument I'm likely to hear is we are not in a bear market. None of the indexes are down nearly 20%. Heck, the large-cap indexes are barely off their highs
The problem there is concentration. In a bear market, not every stock will be in a bear market. Just like in a bullish market, not every stock will rise. We can become so focused with an index or single measurement that we miss the underlying action, and that underlying action is pretty ugly for traders. Value players are hanging in there as are many large-cap players if they've avoided momentum and aggressive growth.
And make no mistake, yesterday's action was a bounce. When you see dozens of names down 8%, 10%, 12%, or more in the pre-market, then finish the day green, flat, or even down 2%, those are significant bounces for a single day move.
The problem with bear markets is you have to be willing to buy those pre-market or opening lows, which often means buying something teetering on the brink and staring into the void. If you buy shortly after the open, you have to be willing to stop through the lows. And if you wait until late in the day with the idea of holding overnight, you get the risks of seeing action similar to today.
It's fair to note that the inflation data from this morning has had a lot of influence on what we're seeing. Those big numbers are what we've already been feeling in our pocketbooks for some time now. The idea that we're looking at December 2022 for the first interest rate bump feels a little optimistic for those wanting rates to stay low. Yes, some of the inflation may be transitory but the longer higher prices stay in place, the more likely we are to accept them on both the personal and business sides of the world. And that's not a positive for interest rates or inflation.
I've discussed only toe dipping on the buying and maintain that stance. We need to add the consideration of selling into rips, even one day rips, unless you have a much longer time frame in mind for recent purchases. Just as the crazy bull market of 2020 that looked like it would never end died in February 2021, the same will probably happen with the malaise of today. It will end but we'll know in hindsight rather than a clear forward vision. Until then, it's time to buckle up.