A bear market is every investor’s nightmare. Many bear markets begin when the economy and markets are steaming ahead and catch investors unawares. When it does arrive, a bear market creates panic and pessimism. However, for those who are able to forest the onset of a bear market and lighten stock investments in time, it presents a great opportunity.

Recognizing Bearish Signs

There are many signs of a bear market. However, Many investors ignore them.

These signs typically are at market top when there is a tendency to ignore ‘bad news’ and warning signs. Traders / investors start believing that the market will continue to go up and up and suddenly to decline.

It is important that traders / investors recognise bear market signals and remain prepared for it. This is not too difficult, as bear markets do not arrive overnight. When bearish signs are identified it is recommended that a trader / investor takes action by reducing exposure to stocks.

Below are some of the signs of a bear market:

1 Increasing interest rate and economic recession.

2 Market rising when interest rate are rising.

3 Cooperate earnings reports coming in below expectation.

4 Over-valued Price Earnings (PES) market rises too much from normal valuation levels

5 Excessive enthusiasm and ecstasy, especially by professionals which typically occur near the end of a bullish market and the start of a bear market.

6 Low quality and priced stocks start to appreciate in price.

7 Excessive speculation.

8 Unusual trading volume.

9 Investors seeking shelter in blue – chips.

10 Distribution as indicated by high volume on down on up ways.

11 Rallies failing on later volume.