3 tips for trading in a bearish market

If you were trading the markets back in April of this year, then you know exactly what a bearish pullback can feel like.

It’s a lot like the quote above.

Here are some tips I’ve gathered over the years for trading such pullbacks (note: I’m not anticipating a bearish pullback anytime soon, but they do happen, so lock these away):

• The moves are much bigger than bullish moves

Meaning, you can make a lot more money -- and lose a lot more money -- with much smaller capital. So if you were to trade long options (something outside of my trading system, but I did do this before unlocking my system), then you’d want to use small bets waiting on big payoffs.

• The upswings can be as devastating as the downswings

... that is, if you’re trading the downward movement like a bear. Because the moves are so much bigger, bears can get trapped fast. Just look at the giant daily candles on the SPY back in April. Big moves, both ways.

• In bull markets, the easy trades are stocks. In bear markets, it’s easy to just trade the Indexes

Companies don’t like when their stock price drops, so they can sometimes release good press to artificially halt a downward movement. However, because the daily movements are so big in a bearish correction, and the volume is so high for the indexes, if you’re going to trade a bear movement long, just trade the indexes. 

You can do it with small capital, focusing only on the big four, and make enough money.

Of course, you have to make good guesses and get both direction and timing right. I don’t like playing that game long term, which is why I just trade my system and patiently endure the bearish corrections.

Yeah, it can be six weeks of low premium, but eventually the bulls charge ahead.

All right, let’s talk about today’s news... 

Bloomberg

Why it matters …

From the article …

“While a dated snapshot of job growth, a substantial downward revision would illustrate a labor market with far less steam last year and reinforce expectations for a series of Federal Reserve interest-rate cuts. A second year of sizable revisions to the employment count also risks drawing the ire of President Donald Trump, who has criticized the accuracy of BLS data.”

There are several Macro articles this morning to read including the fact that there are two pricing reports this week to keep a gauge on inflation.  However, this article underscores the government’s archaic manner of gathering jobs data with frequent revisions. Expect an overhaul soon and some chaos (volatility) to follow as the paradigm shifts to a more robust system.

Comments: We are looking at a mixed open this morning. I suspect this is based on the anticipation of the CPI number to be released this week.  Sideways action is typical when the market is waiting for Macro reports.

There is growing hope that the Fed rate cut will be .5% instead of .25%.  (I personally don’t think they will lower it .5% because that would be admitting that they waited too late to lower rates, and human pride/partisan politics probably will not allow that to happen.)

... 

I’ve got four trade ideas to share for the Premium subscribers averaging 1.71% return on risk.