The bear has appeared. Market feels different. The leaders of recent memory are faltering. Subject line refers to the movie, The Wizard of Oz, when Dorothy gets picked up by a tornado. When she gathers herself, Dorothy says “we’re not in Kansas anymore” because we are officially in bear market territory.
The average duration for bear markets for the past 50 years, is nine months (bulls tend to last 18 months). So if we get an average bear market, it is October before the bull resumes. If this turns out to be Ursa Major, any rallies will be selling opportunities.
Long time readers know that I am a slow moving trader. The choppy market has been good to the quick and nimble. I have been doing a few trades, but mostly rearranging deck chairs (vs making major moves). Being a chicken has limited the losses, though I am still down 6.1% for the year.
Here are a few ETFs for comparison:
GLD gold 26.4%
SLV silver 13.7%
TLT US20 yr 0.2%
EEM EmergingMkt 0.2%
SPY SP500 -10.2%
QQQ Nasdaq100 -13.1%
IWM Russell2000 -15.6%
Again I am -6.1% for 2025, which isn't great, but better than buy and hold. I dodged a couple of bullets by being so cautious. What now? The SP500 heat map is a useful tool for potentially finding new leaders if and when the bull resumes. Obviously, it is just a tool. United Healthcare UNH was a 2025 leader until it reported disappointing earnings.
For those that would like a watch list: BRKB, CRWD, NFLX, MCK. Better is to go look at the heat map yourself and look at various time frames. Unfortunately, many of even the SP500 stocks have poor option liquidity, so shares might be the way to go.
I am still holding substantial share positions in AMZN, NVDA, QQQ, BRKB. Berkshire is the only winner so far. BRKB has a substantial cash position, large positions in various insurance companies, AAPL, and the railroad.
My plan coming into 2025 was to use some of my cash reserves to buy dips. However, the map looks different today. In January 2025, the Reddit option sub was full of people reporting aggressive monthly and yearly profits, full of confident bulls loaded up with leap calls on NVDA and similar. Captain Obvious will tell you anyone with leap calls on major tech stocks is down a huge percentage.
More recently on Reddit, there are many reports of catastrophic account losses. I have often warned about the financial Russian roulette that many aggressive option traders were playing. For some, there number came up. For those with substantial accounts (more than ten years worth of savings), it is difficult to overcome huge drawdowns.
Happy Easter to all who celebrate. Be thankful, be faithful. Bible verse Micah 6:5, Act justly, love mercy, and walk humbly with God.
