Bear Market Ahead

Some of our most reliable indicators warn that we are headed for a bear market:

Yield curve

The 10-Year/3-Month Yield Differential is plunging towards zero. An inverted yield curve is one of the most reliable indicators of a coming recession but it is always early. A more timely warning is when the inverted yield differential recovers above zero. This is a bull trap as it normally occurs shortly before the start of a recession – when the Fed pauses rate hikes or cuts interest rates as the economy is weakening.

10-Year/3-Month Yield Differential

12-Month Rate of Change

Broad market indices, like the S&P 500 and ASX 200, will show a negative rate of change during a bear market. Recovery of 12-month ROC to a positive number is normally an early warning that the bear market is over.

S&P 500

The S&P 500 12-month ROC of -6.03% suggests that the bear market has not ended. Respect of resistance at 4200 would confirm, signaling another test of support at 3700.

S&P 500 ($inx)

ASX 200

The ASX 200 is similarly bearish, with a 12-month ROC of -6.05%. Respect of resistance at 7000 would again confirm, signaling another test of support at 6400.

ASX 200 ($xjo)

Key commodities

Crude oil

Brent crude oil broke primary support at $100 per barrel, warning of a strong decline. 50-Day Momentum falling below zero strengthens the bear signal.

Brent Crude


Copper is in a strong-down-trend, having broken primary support at 9000 per tonne. Respect of resistance at 8000, after the recent rally, would warn of another test of support at 7000. 50-Day Momentum well below zero further reinforces the strong bear signal.



Four reliable indicators all warn of a bear market ahead. Investors should be cautious, while short-term traders need to be nimble to take advantage of strong volatility and exercise sound position-sizing to limit potential losses.

Quote for the Week

We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.

~ Warren Buffett

Colin Twiggs is director of The Patient Investor Pty Ltd, an Authorised Representative (no. 1256439) of MoneySherpa Pty Limited which holds Australian Financial Services Licence No. 451289.

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