2025 Bear Market: What’s Next for Stocks After Breaking Key Support?
by Chad Shoop
Chad is a Chartered Market Technician (CMT) who specializes in stock and options trading. For over 12 years, he’s led some of the largest trading research firms on the planet.
The other week, I gave you the line in the sand to watch for 2025 – the 200 Day Simple Moving Averages (SMAs).
This covered the major indexes, like the S&P 500, Dow Jones Industrial Average and the Nasdaq 100.
In one short week, those levels have been blown out of the water.
All three major indexes are now below their 200 Day SMA’s and are on track for 2025 to be a bear market.
It’s not the best news, but it’s the cold hard truth on where the market stands at the moment.
And I’m just as thrilled as if this was going to be a bull market.
There’s still plenty of profit opportunity.
The big thing you don’t want to do, is turn bearish just because you hear the words “Bear Market.”
Here’s why…
Bear Markets are Not the Bad Omen
Just because we are calling on 2025 to be a bear market, and that major indexes have broken the key support levels, doesn’t mean it’s time to turn bearish on the market.
In fact, it is often times the exact wrong times.
Out of these lows, we can expect sharp swings.
Going bearish right now will likely end up in quick losses as the stock market is overdue for a bounce.
Popular stocks, like Tesla, Nvidia, Palantir, Upstart, Robinhood and many more are down 30%, 40%, even 50% from their recent peaks.
These stocks have already gone through a bear market crash.
They could make lower lows by the end of the year, but the reality is the bulk of this decline – at least in these high-flying names – is behind us. Next, the likely move is a bounce out of the lows, possibly another roll over from there, and that would about do it for downside move in some of these high quality and very strong stocks.
As for the S&P 500, I expect a similar move, with a short-term bounce, and then the potential for a make or break move after that.
Consolidation after the initial bounce would be seen as bullish, as the bears are not in control of the market.
If all we get is a short-term bounce, then a retest of the lows, look out. This market can go sharply lower from here.
But the next leg lower won’t be led by the same stocks driving this weakness. It’s set to expand to the typical safe haven sectors of the market. I’m talking about utilities, healthcare and consumer staples.
Those stocks will take the sharpest declines if indeed 2025 is set to be the next bear market.
Knowing the Next Move is Only Half the Battle
That’s my game plan, more or less.
Bullish on a short-term bounce, fading the names that have played the safe haven trade, and watching for the next break after this bounce.
That’s what’s given.
But it’s only half the battle.
Timing the ebb and flow of these moves is not for the faint of heart. That’s one thing you can count on with major indexes breaching their 200 Day SMAs – increased volatility.
With higher volatility, we’ll see sharper swings that go both ways. The biggest, wildest swings that we have experienced in recent years, will be toppled in 2025. That’s what bear markets brings.
Not an all-out decline. But increased uncertainty and with that, massive swings in the market.
So, take the game plan, add some timing indicators, and play the market extremely nimble over the next few weeks.
We’ll keep you updated on the overall outlook for 2025 as we settle after the latest selloff.
Your key takeaway today is simple: Don’t go all out bearish just because you hear the words, “Bear Market.”
It’s more complex than that and we’ll be here to guide you throughout 2025.
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