The cycle of bear and bull markets never ends, but the manner in which they develop and evolve is always different.
No bear market is exactly the same as the current one clearly exhibits.
The current bear market is particularly unusual in that quite a few people don't even think it is a bear market. People who focus on the major indexes and select big-cap stocks don't see much technical damage, but the reality is that about 52% of all stocks in the market are down 20% or more, which is the technical definition of a bear market.
One important consideration when navigating a bear market is to understand the primary emotions that are at work. Below is a common depiction of how emotions shift during bull and bear market cycles.
There are several problems with this chart however.. The first is that the dominant market emotion is never that easy to determine. Monday morning the market seems particularly lethargic, but is it depression, boredom, indifference, or something else?
The second problem is that the emotions will vary quite a bit by sector. Sentiment in the regional banking sector is probably close to capitulation, while sentiment in some big-cap technology names is probably closer to euphoria.
Another issue is that the amount of time that these emotions may last will vary greatly. The period of despondency that produces a bear market bottom can last a very long time compared to the capitulation phase.
I'm not quite sure where the overall market is in terms of sentiment right now, but there are many frustrated market participants that are tired of struggling. Volume has been slowing, and there is little sustained movement in either direction.
One of the worst periods of trading that I can recall was in 2002 when the bear market that started with the popping of the internet bubble took place. It seemed to drag out for a very long time, and many folks finally gave up.
While there are some similar elements at work right now, this bear market is still evolving, and we will have to be patient as sentiment continues to shift.
