Bear vs Bull Markets: How to Spot the Shift (Uncut) 02-26-2025

Bear vs Bull Markets: How to Spot the Shift | Talking Trades

It’s about how to change your mindset from a bull market to a bear market. And of course, you need to identify the points in time when you move from sort of a bearish trend, a bearish period into a bullish period. We’re setting a bit of a historic precedent here.

Was it really that event that caused the rally to go up? The economy is going to start suffering pain. That is bonkers. Welcome everybody to Talking Trades.

You have Kevin Wadsworth and myself, Patrick Karim, happy to have you here. And Kevin today is going to talk to you about mindset. And once you recognize using charts or whatever, Kevin’s going to showcase us later that you’re in a bull market, something has to change in your mindset, right? For years, the price probably went sideways and now it’s starting to trend upwards.

So you got to really understand what you’re dealing with. And hopefully we get some insights that help you ride those waves. Yeah, thanks Pat for that.

Yeah. So what I want to talk about today is really, as Pat said there, it’s about how to change your mindset from a bull market to a bear market. And of course, you need to identify the points in time when you move from sort of a bearish trend, a bearish period into a bullish period.

And there’s a very big reason why you need to do that. And I’ll explain that to you right now. I’m just going to share my screen.

So hopefully you can see what I’m looking at, which is the gold chart here. And the gold chart shows a number of sort of periods on it where we’ve moved from a bearish trend or a consolidation into a much clearer bull market move. And you can see these red circles that are placed on the chart where we accelerated upwards in a bullish trend.

If I was to put the moving averages on this chart and some other technical indicators, that would back up the fact that we were moving into a bull market at this point. And you can see more recently in 2020 and late last year, and again now, we’re breaking through critical overhead resistance levels. So at these points in time, you can have a high degree of confidence that we’re looking forward to a bullish trend.

Now, overall, of course, ever since the year 2000, if you just look at it on this sort of time frame, the whole thing is a bull market. Yeah, we had a long sideways consolidation of three years or so, but the whole thing is actually really a bull market. But now what I’m talking about, what I’m sort of suggesting that you should change your mindset is first identify whether you are in a bull market or a bear market, and then make those adjustments to your expectations.

So if we just display this chart for a moment on the weekly time frame, because that was the chart based on monthly candle closes, if I put it onto the weekly time frame, you’re going to see a little bit more granularity with what’s been going on with the price of gold more recently. And if I just expand the scale a little bit, you can see those red circles that I put on the chart, and you can see the points in time when the bullish trend resumed. Now, underneath the chart, you might have spotted there’s an indicator.

If I just expand that upwards, you’ll see that that is the stochastic RSI indicator. So adjusting your expectations, and that is really very applicable to the technical indicators, because you’ll hear people talking about when something is oversold or when it’s overbought. What I mean by that is that on some metric, like, for example, the stochastic RSI indicator here, which is shown at the bottom of the chart, you reach a point where the indicator is right at the peak, and that is where people say it’s overbought.

And then it drops all the way down to the bottom of the range. These range bound indicators move from a high point to a low point. Now, when you’re in a downwards trend, when you’ve identified that you’ve reached your target, and then you’re consolidating, and you’re possibly moving into a bearish trend, what happens when the indicator reaches its high point and resets down to zero? Well, in the case of gold here, it fell from $1,800 all the way down to around about $1,200.

It dropped $600 just in the period of time that that indicator reset. Now, contrast that with what happens here when the indicator resets. So you’re in the same overbought condition.

The indicator is right at the top, as high as it can go. So you’ll hear people saying, oh, it’s overbought. The price of gold has got to drop by $100, $200, $500.

But look what happened. The indicator fully reset back to zero, and the price of gold fell from approximately $1,500 down to somewhere around about $1,450. So it fell $50, whereas in the previous example, it fell $600.

So the indicator fully reset, price fell $50 compared to hundreds of dollars in a bearish trend. So trying to get your head around that is really important, because what it means is that once you’ve identified a breakout during a bullish uptrend, the relevance and the importance of an indicator like the stochastic RSI or any of the other oscillating indicators, the TSI or the true strength indicator, any of these oscillating indicators, the relevance of it being in a so-called overbought position is diminished. It has far less impact being overbought on a weekly time frame when you’re in a bull market than it does when you’re at the end of a bull market uptrend and looking at a potential breakdown and a bearish downtrend.

And again, it comes down to identifying when that breakdown occurs and weighing all of the evidence to tell you how likely it is that the price is going to make a major breakdown here. And if you know that the odds are quite high that you’re going to get a major breakdown here, then it automatically tells you the significance of this indicator resetting is going to be much, much greater than it is in an uptrend. Look, you can see it here again.

You can see that whilst we were consolidating in this three-year consolidation, the indicator reset and the price fell quite a long way from nearly $2,000 all the way down to $1,600. So it fell $400. But once we broke out, we got the big breakout here, we had another reset of the indicator very recently as the price hit $2,700 or so, and it just dropped a very, very small amount, $150, $200.

It didn’t fall $500, $600 or so. And why didn’t it do that? Well, that’s because we’re in an uptrend. We’re in an established uptrend.

We have not broken that uptrend. We’re above the three-year moving average. We’re above the Ichimoku cloud.

We are above key support levels. So the idea is, as I said, firstly to identify, are we in an uptrending bull market or are we breaking down? What supporting evidence do we have to suggest that the breakdown is going to continue? And if that’s the case, then these overbought indicators take on a whole new level of significance. But in an uptrend, they play a smaller part in terms of how much the price is going to reset.

And that is my tip for today, Pat, when it comes to assessing overbought and oversold indicators. Know the mindset. That’s right.

Smaller-term cycles within longer-term trends, and there’s a difference between those two. Good. Thanks, everybody, for watching.

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