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Bear Market Trading Posts

i hope he's hedged

i hope he's hedged

The $SPY gapped down today.

We're now officially a "bear market" with equities 20% off their highs.

But you haven't needed a magic level to see the ugliness of the tape, as $XLF and $SLX have been pounded, along with the Looney Tunes-like fall of many commodity and emerging market plays.

Trading a market like this requires a different mental framework compared to the liquidity-infused market of late 2009/early 2010. I've tried my best to help option traders navigate this market, and below is a list of my posts that will help you as well.

5 Tips to Trade Options in a Bear Market

Cash and agility are king right now, and if you're trading options you need a few more tactics if you're going to survive this market. You can start with these 5 tips.

How Bears Can Lose Money

Super-volatile markets aren't as simple as shorting and walking away. Bear market rallies can be fast and hard, and mean reversion occurs more than you would think. Make sure that 2008 isn't biasing you too much.

Analyze Patterns With Volatility in Mind

This video shows you how measured moves from traditional technical patterns need to be adjusted for volatility, as this will affect your risk/reward profile.

Bear Market Rallies

I put out a video after a solid squeeze higher showing how we weren't out of the woods just yet. Remember, some of the fastest upside moves come during downtrends.

On Contrarianism

Calling a top is easier said than done. This post from back in January called to task all those that were turning bearish in spite of a strong tape. We are now lower than those prices but only after true confirmation in the market.

Bollinger Bands and Stretched Markets

This ill-timed post showcased a study indicating that price moving into the Bollinger Bands aren't necessarily indicative of an overbought market. It's more important to wait for confirmation.

The Glencore IPO and the Topping Commodity Market

The move for this commodity firm to go public seemed very, very similar with how private equity firms cashed out back in 2007.

Are You Reading the Charts Right

Back in May I presented 2 different ways to chart equities, and how your bias could lead you to black and white analysis, rather than the nuance required in this market.

The VIX Flipped

In early June, the $VIX completely changed character. Option traders became overconfident into selling premium into dips-- they were rewarded in June, but punished in July.

Just Like 2007?

The price action of $SPY in June started to resemble the market structure in 2007, only on a shorter term basis. So far, this analogy is holding up.

The Breakdown in the Financials

Although relative weakness in $XLF isn't necessarily a bad thing on a longer term timeframe, it's still tough for the market to hold up with the banks breaking down.

Tune Out the Political Noise

I called out the debt ceiling debate for what it was-- a big red herring. Soon after that, the ceiling was lifted, and then the market tanked as the US was downgraded.

It's All About the Dollar

In probably my most poorly timed post, I laid out the conditions for higher equity prices, assuming 3 conditions. That worked out well.

Buying the Blood

During the first move lower, I laid out names that I liked for put sales. They all would have been profitable, but relative to the drawdown you would have taken, they would have been very poor trades.

The Giant Breadth Divergence

To hedge my post about the dollar and the bullish equity case, I point out that the market was running higher with fewer names leading. This case had persisted all year, and it finally came to fruition with the clear breakdown.

 It's About China, Stupid

I called out the next bearish news story as steel names like $AKS, $X, and $STLD continued to get hit and $CAT cited slowing growth in China ($FXI).

Defining Panic

With the strong move lower in equities, I called out that it was nowhere like 2008. However, if we look at the flight into $TLT, we saw that it had surpassed 2008 volatility.


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by Steven Place

Steven Place is the founder and head trader at