Bear Markets: Shock vs Grind
We’re not in a bear market. Not yet. That matters – because how a bear arrives tells you how it behaves. Not all bears are the same. Some hit like a car crash. Others just slowly drain the life out of the market. Let’s look at two very different bears.
The Shock Bear - COVID - 2020
This was a classic event-driven bear. Something external broke the system. Liquidity vanished. Headlines screamed. Traders ran for the exits. Everything was sold. Fast.
Prices didn’t drift lower – they fell off a cliff. Straight down into bear territory. In 33 terrifying days.
The Covid Bear Recovery
The recovery was just as fast, Straight back up, with no time to think. Out of the bear market in less than 3 weeks, and back to previous highs within four months.
Why? Because nothing structural had actually broken. The economy didn’t unwind – it was paused, then restarted. ITM had one clean exit and one clean re-entry. That’s as neat as it gets.
We didn’t make much money on that bear trade – there simply wasn’t time! – but it set up a nice steady bull market which lasted until the Biden Bear in 2022. Which was quite a different animal.
The Grind Bear 2022
It was a completely different animal. There was no single “event.” No panic liquidation. Instead, rates rose, liquidity drained, valuations compressed. Slowly and relentlessly. This was not a shock, it was gravity. Price didn’t collapse, they eroded. Lower highs, failed rallies, endless “maybe this is the bottom” moments.
And that’s what made it so dangerous.
The Real Risk Isn’t the Drop
In a shock bear, the danger is obvious. Everyone sees it. Everyone panics at the same time – then there’s a fight to get out the door first.
In a grind bear, the danger is psychological. It looks like recovery, over and over again. Breakouts fail, rallies stall, hope turns to disappointment. It wears you down until you are ready to throw in the towel on this trading lark!
You can see in the chart:
- that it took 6 months just to reach bear territory
- Once there, it barely pushed lower before bouncing
- It hovered in and around bear conditions for over a year
- The market didn’t reach previous highs for 2 years.
Not a good time to be trading!
How did ITM do in the Grind?
Not brilliantly. Unlike the GFC bear market, which dropped 56% and we had several excellent bear trades, this bear just never gave us the opportunity. ITM got us out of the market in plenty of time (see the red lines) but it didn’t drop far or fast enough for us to get a good bear trade in.
It bounced annoyingly along the bottom, just wearing us out. I wasn’t ready to throw in the towel on trading – but I was certainly ready to throw in the towel on the blog. It was desperately depressing writing about that bear market week after week!
Signals Don’t Predict - They Reveal
ITM doesn’t try to guess what kind of bear is coming. It simply reacts to what’s happening. Even if you don’t do any bear trades, ITM keeps you out of the worst of the decline, preserving your capital for the next bull market. Which always comes.
You don’t need to avoid the entire bear market. You just need to avoid the worst part of it.
The obsession with “perfect exits” comes from looking at charts after the fact. Especially with something like COVID, where everything looks obvious in hindsight. But that’s the trap.
What About Last April?
March and April last year (2025) we had a brief scare. Prices dipped into bear territory intraday, then reversed. So, what was it? Event-driven? Or the start of something deeper?
It had the feel of an event: sudden, news-driven, sharp reaction. But it lacked follow-through. No structural deterioration. No sustained pressure. And it didn’t develop into a bear.
Where We Are Now?
We’re out of the market but far from a bear – in fact, we appear to have bounced off the correction level.
There is no clear structural problem. This looks more event-driven, like this time last year. The market reacts sharply to every bit of news about the war in Iran
Covid triggered fear, but this environment triggers impatience. The urge to anticipate, second-guess, get in early. This is the hardest phase of all, because nothing is happening – and that’s when people start doing things they shouldn’t
On the bench
So, we’re on the bench. ITM will tell us when it is safe to get back in. No prediction. No guesswork. Just waiting.
If you want to check out how ITM performed in bear markets over the last 30 years here’s the link: https://heathercullen.com/backtesting/bear/
To the markets . . .
A bit of a nothing week – having said that there were some big swings but as Macbeth said : ‘. . full of sound and fury, signifying nothing’ . We still haven’t got a direction. The rebound on the last 3 days was not very convincing.
SPY Charts
The rebound seems to be fizzling out, and on very low volume – not that surprising as it was a short week. We are back to the level of the bottom of our previous Darvas box, which may prove resistance but it is too early to tell.
Longer term we can see that the rebound is not yet significant.
SPYG Charts
SPYG also saw a rebound – notice that intraday it bounced back under $100 which was a level of resistance in August / September last year. Will be interesting to see if it clears it.
On the long term chart we can see the rebound in context – not particularly significant.
QQQ Charts
QQQ is reaching the bottom of the yellow Darvas box – which may prove resistance. We’ll see.
And in the long term:
VIX Chart (Volatility)
Elevated volatility as expected.
ITMeter
We’re out of the market – not in either a bear or bull trade.
The week ahead . .
Feels slightly more relevant this week — but still, don’t be surprised if headlines move the market more than the data.
Monday – April 6
• No major economic releases scheduled.
• Markets likely to take their cue from ongoing news flow and positioning.
Tuesday – April 7
• Trade Balance.
• Insight into imports/exports — not usually a market mover, but worth noting.
Wednesday – April 8
• FOMC Minutes (March meeting).
• Markets will be parsing every word for clues on rate direction.
Thursday – April 9
• Initial Jobless Claims.
• Ongoing read on labor market strength — still one of the key pillars holding things up.
Friday – April 10
• CPI (Inflation Data).
• The main event. Inflation remains the driver of rate expectations — and therefore the market.
The futures
Bouncing around – when I looked around 30 minutes ago they were down, now they are slightly up.
And finally . . .
The new ITM book will be coming out next Monday – I will notify you in the Blog. I will reduce it to cost price for 48 hours to give everyone the change to update. The basis of the book is the same, but with differences:
- New QQQ Bull market strategy
- New Bear market strategy
- SPY / SPYG updated to late 2025
- Companion website with podcasts, videos, quizzes
I will be ‘unpublishing’ the previous ITM books as this one supersedes them all, and is my ‘swansong’ edition – I do not expect to be publishing any further books, rather build up the website to replace them. I will let you know the details next week.
Fingers crossed . . that we can get back to a ‘normal market’!
Heather
Trade the tide, not the waves
12 Responses
Hi Heather
when we are out of the market we can park our monies in a short term USA etf Sgov that pays 4,3 interest the interest is paid daily
Hi Raymond – I’ll take your word for it – I don’t think I am eligible (being overseas) – but this may be very helpful to others?
Thank you!
x
h
Just a note since you sometimes point out our failure to note something missing in the blog – no VIX chart under the VIX chart heading.
You’re still the best.
Hi Robert!
OOOOOPS! Silly me.
All fixed now – thank you for letting me know!
(You can’t see what you can’t see)
x
h
Hi Heather I am enjoying your book. I have 2 questions. Today the Spy is trading at $655.83 as of Sat. April 4th, 2026. It is dated 349 days out or March 19, 2027. Looking at the options chain where I invest 10k puts my effective purchase price at well over the SPY price. How do we deal with that? The second question I have is that if I look at the Strike price of 325-330$ which is about half the SPY price , the investment is around 33K
HI Roger – you must be on a very old copy of the book? Way back in 2022 I introduced SPYG and ITMS (ITM Small) as an alternative as SPY was getting too expensive for many people.
We’re out of the market right now anyway, so you can afford to wait another week – and get the new book (at cost price – it won’t break the bank!) which sets out the SPYG option strategy which you can get into for less than $5k.
If there is anything you don’t understand in the book just get back to me – it means I haven’t explained it well enough and I need to know!
x
h
When it’s time to go fishing…We fish.
When it’s time to go flying… We fly. We land at our destination eat our meal fly back home… When it’s Monday we read what Heather writes … When it’s time to wait… We wait. When it’s time to do something… We do it. Kinda fun when we do it together.
R
Hi Randy!
Waiting isn’t my favorite thing – but its nicer when I get lovely emails like yours!
x
h
Hello Heather
Just reading my Monday morning “Heather letter” with my coffee. Wondering where will we be able to pick up your new book, will it be on amazon again, or will there be a special link.
HI Michael,
It will be on Amazon for 90 days, then it will be on this website as well.
I have just been doing the set up for the pricing and it will be at cost – the ebook will be $2.99 (Amazon’s minimum) but the paperback and hardback wil be more expensive as they are in color – it makes all the difference to the charts and tables, but also increases printing costs.
The special link will be on next weeks Blog.
Whew! I am so glad the end is in sight – writing is the easy bit – it is everything else that is the slog!
x
h
As Always I appreciate how you Heather share what you have learned so generously, we are very fortunate to have the benefits of all your work.
2022 was definitely the time that tried my soul. I can only imagine how hard it was to keep writing throughout that painful market. The methodology gives some sense of peace, but the back and forth makes one question everything.
Hang in there friends. Check the market less often if that helps. Praying for peace.
Hi Kate! Thank you!
Yes, 2022 was dismal, did not enjoy it one little bit. And not compulsively checking the market helps also.
Peace – that would be so good . .. let’s hope!
x
h