How to Survive the 2019 Bear Market

From a partial government shutdown to a full stock market meltdown, the final days of 2018 brought more drama to the table.

But before we dive into the latest market-moving events, let’s lay 2018 to rest.

When we last officially checked on stocks just before the holidays, it looked as if the major averages would never find their footing. Stocks gapped down and plunged to new lows on Christmas Eve, extinguishing any hope that Santa would bring presents to the good boys and girls of Wall Street.

But an explosive rally took hold as soon as the market reopened the day after Christmas. The Dow gained more than 1,000 points for the first time ever in a single day. The S&P soared 5%. The Nasdaq Composite jumped nearly 6%. It was the biggest rally we’ve witnessed since the final weeks of the financial crisis bear market in 2009.

INDU

Last week’s oversold bounce has now turned into an actual relief rally as the averages have finished in the green three out of their last four trading sessions. While this move hasn’t even come close to repairing the damage inflicted on the market over the past three months, it does soften the blow for the millions of folks checking their year-end 401(k) statements right now.

When the dust settled, the major averages still finished the year in the red.

The S&P 500 fell more than 6% in 2018. In a vacuum, a 6% loss on the year doesn’t seem so bad. But watching it unfold in real-time was a completely different experience.

Turn back the clock to the third quarter and the S&P was posting new all-time highs while closing in on a year-to-date gain of 10%. Back in the spring, stocks were in the red on the year and fighting off their lows…

SPX

But the drama that started it all was the now-infamous January melt-up rally.

One year ago, the bulls ran amok as the stock market went parabolic.

Stocks were on what looked like an unstoppable tear to begin 2018. The averages had become so cooperative, in fact, that traders gobbled up even the smallest intraday reversals to send stocks soaring to new highs.

In short, investors were completely unprepared for a real market pullback.

At the time, the big gripe about the markets was the lack of dips for investors to buy. After all, how is a trader supposed to “BTFD” when there are no dips to be found? Stocks marched higher virtually uninterrupted. Anyone patiently waiting for a real pullback was stuck on the sidelines.

Of course, once stocks dropped, those very same investors were cowering in the corner. Why? Because the market trained them to only think about potential gains and completely ignore risk.

SPX

One big takeaway from 2018 is how easily you can get caught up in the excitement of a major market rally. The financial media crams your feed with bullish stories every second of the day. Your weird cousin brags about his crypto gains. Even your deadbeat friends are making money trading stocks while living in their mom’s basement.

As you’ve probably guessed, this year is starting out much differently…

We’re prepping for a full slate of stock market drama to kick off 2019.

International stocks are tanking early this morning following the release of weak manufacturing numbers out of China. Asian and European shares have started the year deep in the red. Stateside, futures are indicating the Dow could drop as many as 350 points.

Yes, it’s getting ugly out there. What’s worse is that a sinking market doesn’t care about your favorite investments. Good stocks move lower with the bad. Watching stocks tick lower every week can be traumatic. You’ll find yourself wondering why it all went wrong.

So how can you combat the growling bear gnawing at your returns?

Your first step is to take smaller positions when trading. Risk half of what you normally would when the market is moving higher.

We also can’t trust breakouts to follow-through in our favor. Our best chance at gains is to stay selective with our new trades and take profits early and often.

When it comes to long-term investing, dollar-cost averaging is your best friend. After all, you don’t know which dip will be rock bottom. You might even get a chance to scoop up some impressive bargains…

“I scan the NYSE new low list on the last few days just before Christmas to find high-quality dogs,” chimes in our own income expert Mike Burnick.  

Dogs are blue chip stocks that are making new 52-week lows, Mike explains. As it turns out, the dogs of the Dow (the worst of the worst stocks) usually rebound strongly and outperform well into the new year.

Thanks to the December swoon, Mikes notes that more than 1,000 stocks trading on the NYSE posted new lows last week.

“Not only does this list of bruised blue chips have the potential to outperform the stock market over the next month or more, but they boast an average dividend yield of 3.8%,” Mike continues. “You’ll still get paid handsomely while you wait for the share prices to rebound.”

While you’re waiting, Mike has a new tactic he’s ready to share with you that could add as much as $383,515 to your retirement. But you have to act in the next 24 hours. Click here for the details.

Sincerely,

Greg Guenthner

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Greg Guenthner

Greg Guenthner, CMT, is the editor of Opening Bell Fortunes and Seven Figure Signals. He has been with Agora Financial/Seven Figure Publishing since 2005. In 2019, the average position in Greg’s Sunrise Fortunes portfolio outperformed the S&P 500 by 1.65x.

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