On Thursday, the small cap Russell 2000

index entered a bare market. On Friday,

the NASDAQ 100 index entered a bare

market. So, it looks very likely that

the S&P 500 may enter a bare market this

coming week. Now, the last four bare

markets I went through make me even

richer. So, here's how I'm taking

advantage of this coming bare market.

[Music]

Now first of all let me define what a

bare market is. A bare market is when

the price drops and closes 20% below the

previous peak. So like I said that the

Russell 2000 closed 20% below the peak.

NASDAQ 100 closed 20% below the peak on

Friday. Now the S&P 500 which is the

main index has not yet done so. It is

down roughly about 17% from the peak.

But given that the first two indexes

have already entered a bare market,

there is a high chance. Again, it's not

a guarantee, but there's a high chance

the S&P may enter into a bare market

this coming week if the price keeps

dropping. And so, the S&P has to close

below about 4873 somewhere here. Close

below there for it to be a bare market.

Now, you've heard me say in the previous

videos that I thought a bare market was

very unlikely. Well, it looks like the

unlikely could be happening. And that

shows you that it's, you know, anything

can happen in the markets. Anything can

happen in the markets because there are

so many moving parts in the economy, in

politics that there's no way to predict

for sure. So, in the first place, why do

I say that it's very unlikely for

another bare market to happen? Well,

because we just went through two bare

markets in the last 5 years. Now, let me

tell you how rare it would be to get

another bare market right now. But to

also explain to you how it could happen

even though it is so rare. Okay. So, if

you take a look at the last 74 years

since 1950, there have been altogether

12 bare markets. So if you take 74

divided by 12, that is a bare market

occurring on average once every 6 years.

Now that makes sense because most bare

markets occur as a result of a recession

because of the economic boom and bust

cycle that takes several years to play

out. You take a look at the last two

bare markets, they happen very close

together. So for example, we had the

2020 bare market uh where the market

dropped 35% uh to the bottom and then in

2022 we had the bare market where it

dropped 27% to the bottom. Now why did

it occur so close and why is this one

potentially occurring very very close?

The reason is because the last two bare

markets and this one is not caused by

the normal economic boom and bus cycle.

These bare markets are artificially

induced by the government. So for

example in 2020 what happened as a

result of the pandemic the governments

in the world decided to do a global

lockdown. So they shut down borders. The

moment you shut it out it shocked the

system and that's why we had a bare

market and we had a very fast drop and a

very fast recovery once they open up the

borders and there was a vaccine. Same

thing in 2022. 2022 was also

artificially induced because of very

high inflation. The Fed had to kill

inflation. So they raised raised

interest rates at the highest rate in 40

years. Now bear in mind that there was

actually no recession that occurred but

the market kind of like priced in the

recession. So when there was no actual

recession in 2023 where everyone

predicted it, the market rebounded back

to all-time highs as you can see over

here. Now and the same thing is

happening right now. Right now there's

nothing wrong with the economic cycle.

The economic cycle is going on very

smoothly but again it's being

artificially induced by the Trump

administration where they are slapping

these super high tariffs and shocking

the system and that's why it could

potentially create another bare market

in the S&P 500. So is this good news or

bad news? Well, you know, I'm I'm a kind

of optimistic person. I like to see the

cup half full uh rather than half empty.

And the way I see it is why I think it's

good news is because again these bare

markets are artificially created. And so

because they're artificially created

once the Fed or the government they

decide to shift their policy the market

would repric very quickly and we are

back to all-time highs again. Of course,

the million-dollar question is that will

the Trump administration shift their

policy, shift their narrative, or will

their or will trading partners blink

first and decide to lower tariffs so

that the US will lower tariffs? That is

something that there's no way to predict

unless you're sleeping with Trump by his

side. You can hear him talking in his

sleep or you buck all the offices of all

the foreign countries in the world.

There's no way you can predict predict

this. There's no way to know when that

shift occurs. Whether it's even going to

be this year or next year or next week

or next month, no one can predict. But

the moment that shift occurs, markets

will repric all the way back to all-time

highs. So remember that the reason the

market is going down right now is that

it's not because of a deterioration of

the fundamentals of the business. The

fundamentals are exactly the same. The

market is basically going down anticip

anticipating that there will be a global

trade war and recession that has not yet

occurred. So remember that the market is

not the economy. The market doesn't

reflect what is happening to the economy

right now. The market prices in reflects

what could happen to the economy in 6

to9 months.

So, as long as policy changes and

narratives change before there's real

economic damage, before there's real

deterioration of fundamentals, then of

course markets could go up as fast as

they came down. Now, while I can't

predict exactly when that's going to

happen, let me give you a bit of a

silver lining. This current market drop

has been very rapid. You can see the

market has dropped in a 90°

fashion and we call that a parabolic

drop. My friend Alson Chu likes to call

it a flush down. Now, I love it when

markets drop 90 degrees. Why? Because

from experience, I found that the faster

the market drops, the faster it rebounds

back up. It's kind of like a rubber

ball. The the faster you throw the ball

down, the higher you throw the ball, the

higher it bounces. But if the ball goes

down

slowly, then it takes a long time to get

back up. Let's take a look at a few

examples in history. So in 2020 if you

recall market dropped rapidly as well.

You can see that very sharp oh almost

90° drop and and the market basically

took 22 days to enter a bare market.

Think about in 22 days it dropped into a

bare market. The market dropped and

closed 20% uh from the highs and because

it it fell so fast you can see the

market recovered very fast and by the

end of the year the market was up 18%.

Right now look at the difference in the

dotcom bust and the great financial

crisis. Now the dotcom bust that

happened in

20201 the market didn't drop rapidly

into a bare market. It took a long time.

So it was just like a slow agonizing

painful death by a thousand cuts. Right?

So in fact you can see from the high

over here that was the high of the

market. It

went okay. It took it took

353 days to enter into a bare market.

Think about it. It took almost one year

to get into a bare market. And that's

why it took more than 2 years to recover

back to the uh

highs. What happened in the uh great

financial crisis of 2008 209? Same

thing. The market went down very slowly.

It was an agonizing painful death by a

thousand cuts from the high of the

market went

down. All right. Now over here you can

see this represents this red box

represents a 20% close from the high.

You can see that in the global financial

crisis it took

265 days uh to enter bare market. Again

it took a very long time and hence it

took over a year and a half to recover

back. So once again, short 90° drop,

high chance of a fast rebound to

all-time highs. Slow 45 degree decline

takes years to recover to all-time

highs. And this current tariff war 2.0

that we are now going through is a very

sharp parabolic drop. And again, the S&P

500 is not yet in a bare market. But

next week if if if it drops into a bare

market by hitting

4873 then we would officially enter into

a bare market in less than 50 days which

is considered a very sharp drop. Now

again let me show you examples of past

sharp drops past parabolic drops and

what happened thereafter and how fast

was the recovery. So let's take a look a

look at the last four examples. So once

again uh the most recent example was the

2020 COVID crash and you can see again

from the all-time highs the market

dropped parabolic almost 90° and it was

35% all the way to the

bottom and from the bottom by the end of

the year it went up 70% from the bottom

and closed the year up 18% year to date.

sharp drop, sharp uh

recovery. Then the the crash just before

this was the 2018 uh trade war 1.0 and

2019 taper tantrum when the Fed decided

to uh stop quantitative easing and to

raise interest rates. So let's what see

what happened there. So same thing you

can see that was a high of the market

and the market again dropped very

rapidly. It was a parabolic drop right

here. Market dropped 20%. Now, this was

not officially a bare market, but it did

drop 20%. And it was very

rapid. Um, by by the end of the next

year, you can see it was up 38.7% from

the lows and it closed 2019 up 31%.

Now this particular year where it the

the the crash started it started in

October in the last 3 months but despite

that 2018 ended down

4.23%. Down but still not that big only

down

4%. Let's take a look at the one

previous to this which was the 2015 to

2016 China shock where Chinese growth

slowed down and oil prices crashed. Now

this was not a bare market but this was

a very sharp parabolic drop as well. You

can see here 90° drop boom and another

sharp drop boom and you can see from the

bottom it went up

24.8%. Uh by the end of 2016 the market

was up 11%. And by the end of 2015 where

this first drop occurred market ended

positive as well. Last example of the

parabolic drop was 2011. Now this was

caused by the US credit rating being

downgraded from AAA to double A plus the

European sovereign debt debt crisis. We

had two uh crisis going on at the same

time and you can see what happened in

2011. Uh the market again dropped

rapidly over there dropped rapidly over

there. So it dropped 21.6%.

But by the end of the following year,

which was 12 months

later, you can see the market was up

34.37% from the lows. And it ended 2012

year to date gain

15.89%. And even this previous year when

the crash started, the market ended up

2.1%. So am I saying that this current

crash we're in has bottom? I'm not

saying that. Of course, I'm not saying

that. It could still go lower. But the

question is, would I be a seller right

now? Would I want to sell my stocks

right now? Or would I want to short the

market right now? Hell no. I wouldn't

want to do that. Even though it may not

be the bottom. I tell you why. Because

again, if you take a look at history,

every time there is a very sharp drop

like that, okay? Even if it's not the

bottom, it would usually have a sharp

rally before going lower. Same thing.

Take a look at the previous example over

here. when you have a sharp drop even

though it may not be the bottom right

there was even there was a bigger bottom

coming but you can see a sharp rally

sharp rally and then drop back down. So

one of the common mistakes that people

make is

that when they see the market dropping

rapidly they panic or they get a margin

call whatever it is right and at this

stage they may sell in panic or they

short the market and once they short the

market what happens the market goes up

they go oh and their shorts get

killed or they say I sold and now

it's a higher price and so they think

okay the market's recovering and they

they buy back here and what happens

after they buy back it goes out They b a

they get stopped out again. For

some people have got a stop loss and

then they say okay let's short the

market again. So they short the market

again or they sell everything and it

goes up a and their shorts get killed

again. Okay. And they say okay let me

buy it all back and it goes down they go

a they get they get screwed both ways

and finally when they throw in the towel

they give up. What happens the market?

Hallelujah. It goes all the way up

again. So coming back to the present

day, let's take a look at the S&P 500.

It has so far sliced through the first

two support levels that I identified and

it's now closed below the second support

level. Now the third support level over

here, this is about a 20% drop. So next

week if we get further retaliation from

the Canadians, from the Mexicans, from

the Europeans and they join China in

retal in retaliating and raising

tariffs, creating more uncertainty and

more panic, then sure, we could close

below that 4877 and be officially in a

bare market. So again, in a bare market,

how low can we go? You can't predict

exactly, but historically bare markets

tend to bottom between anywhere from

from 20% from the highs to 35%. I

personally do not see that this

correction or bare market goes more than

25% below the high. So to me, I think

the last level of support that we'll see

in the S&P 500 uh before it finally

bottoms would be somewhere around 4

657 thereabouts. And how did I get this

support level? Well, if you take a look

at the monthly

candles right here,

uh you can see

historically the S&P 500 has had a very

strong support at the 50 moving average.

It dropped, it bounced, right? It

dropped uh and then bounced from here.

Although it did have a bit of an

intrammon low, it dropped, it bounced

off the 50 right there. And again, right

now it's dropping. I see this 50 moving

average on monthly candles as the last

support before you get that that

eventual bounce. But again, like I said,

it if it does get to

4657, it will not be in one straight

line all the way down. In fact, I expect

that very soon in the next uh few days,

maybe Monday, Tuesday, Wednesday, we

should get a pretty sharp uh rally back

up, a relief rally. There's usually

after shop drop, you have a relief

rally. And indicators are showing that

the market is very oversold, poised for

rebound. Let's take a look at some of

these indicators. So, one of the

indicators that I like to look at that

was uh created by Larry Williams, the

legendary uh Larry Williams, which I've

got, you know, tremendous respect for uh

is this uh oversold indicator. This

works on the weekly candles on the S&P

500. And we're looking at uh three main

indicators uh primarily the first two

which is the Williams percentage R 52

period close the Williams percentage R

13 period close and you can also look at

the ATR normalized which is kind of like

a bonus but it's not 100% necessary. So

it's looking at the first two indicators

and what we are looking for for a very

high probability of a bottom. Again, it

may not be the absolute bottom. It could

be a bottom rally and another bottom.

All right? So, it may not be the bottom

bottom, but is one of the potential

bottoms. So, you tend to get a potential

bottom um when you see the Williams 52

go below minus

80 and the Williams 13 also going below

minus 80. So when these two lines, this

blue line and this orange line, they go

below this level here. All right? So

like this here, this is a very

uh clear signal of an oversold market

ready to bounce. So if you take a look

at for example

recent

examples, when were they both oversold?

Over here you can see

oversold oversold. So that marked the

bottom. Okay. And then it bounced up as

you can see. Now here same thing you can

see

oversold oversold marked the bottom

bounced up. Like I said it may not be

the ultimate bottom but it tells you

that it's going to rally and it may make

a new bottom and then it rallies again.

Now where else do we have it? Over here.

Can see oversold. oversold that marked

the bottom of the uh 2020 crash went up.

So right now, same thing. You can see on

the Williams 52, we are oversold. We are

oversold. So we at a point very close to

a sharp rally. Again, it may be the

bottom or it may be uh an intermediate

intermediate bottom before we get

another bottom over here. Hard to

predict. Really depends on how the

macroeconomics or the politics play out

which which I can't predict. I can just

look at charts and tell you um whether

they are oversold or not. Now the other

set of charts that I look at again

created by Larry Williams would

be on

stockcharts.com over

here. So this is looking at two

additional indicators. One of them is

the money flow index. This tells you

when big institutions are buying stock.

So when you see that this red line which

is the money flow index goes above this

green line which is about 75 that means

institutions the big boys are

accumulating stock and that is usually a

bullish signal and you can see what

happened over here when it went above

the green line when the money flow index

was in huge accumulation in uh big

institutions buying stock that marked

the bottom of the market over there And

right now where are we? Right now you

can see the money flow index again has

just crossed above the green line in

heavy accumulation by big

institutions. The other thing that I

look at is the sentiment index. So the

sentiment index is a contrarant uh

index. So in other words when the

majority of the media all very bearish,

they say that it's going to be a

recession, depression, we're going to

die, it's a crash. That's when this

green line drops below the red line when

it's extreme pessimism and that is a

contrarian indicator because when

everyone is pessimistic the market tends

to go the other way. So right now you

can see it is right there below the red

line it is at extreme pessimism right

there. Now look at previous times when

it happened. Uh over here extreme

pessimism over here you can see had a

bounce right extreme pessim pessimism

over here with a

bounce. Uh here

pessimism

bounced

pessimism

bounced

pessimism bounced a bit went back down

again. So again it may not be the bottom

but it could bounce and make another

bottom over there. Remember that these

indicators or any technical charts they

are not crystal balls. They have got no

predictive ability. They are just

showing you uh what is the higher

probability. So it's just telling you

that after the price has dropped rapidly

right now is at a point where there's a

high probability of a bounce. So would I

want to short the market right now? I'll

be very weary. Would I want to sell my

stocks in panic? Of course not. If I'm

holding high quality businesses that I

know will keep growing in value in the

long run, I wouldn't want to sell my

stock. Now, of course, if you are a

trader and you're holding lousy

companies that are not making money,

that are highly speculative and they're

overpriced, then yeah, you got to have a

stop-loss and just get out. Get out.

Okay. But if you don't have a stop-loss

and you're holding to lowquality

companies, then I would want to get out

as well. But I'll wait for a bounce to

get out unless my stop loss has already

been triggered. Now, for me personally,

again, as an investor, as a long-term

value investor, I don't sell great

companies. I buy great companies. And

these are the times when there's a big

correction, a big bare market. This is

the time where you you really add great

companies at huge discounts because that

is how your next million or few million

is made. But again, it's all about

buying high quality companies. You look

at the 11 sectors of the S&P 500, you

can see where are the biggest deals on

on sale, right? Technology, consumer

discretionary, also known as consumer

cycles, communication services, and so

forth. So, in my next video, I'll drill

in to talk about what I think are some

of the highest quality stocks in these

most oversold uh cheap sectors that we

could take advantage of while the market

panics and we can profit from that

panic. So, thank you for listening. May

the markets be with you. I'll see you in

the next video. If you want to catch my

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is Adam Coup and may the markets be with