"No one makes money in a bear market, not even the bears"The market just had its largest one week advance since 1974 and there were only three and a half trading days in the week. The sharpest rallies occur in the context of a Bear Market and the rally we just had certainly fits the mold. Bear market rallies can exceed 30% in size and can last as long as three months. Few Bears can survive such an assault. No one who has been involved in markets the past few months needs an explanation of what can happen to Bulls in Bear Markets.
-Old stock market saying by unknown
There are two occasions in a Bear Market when one can be profitable without taking unacceptable risk. Buying when the market is deeply oversold and pessimism is extreme and shorting when the market is overbought and investors are optimistic. The consequences of being wrong anywhere in between the extremes can lead to unacceptable losses. The key is to be patient and wait for the extremes even if it means staying on the sidelines for months at a time.
At present, the odds favor a continuation of the current rally as the rally is only a week old. However, the market is no longer deeply oversold and sentiment has improved somewhat so the protection that is required to take an aggressive stance is no longer in place. In addition, there are some conflicting forces at the current moment. Seasonality is positive through Tuesday, while the market is also short term overbought arguing for a pullback.
In the current context, it is best to stay out of the way for all except the most risk seeking individuals. For my part, I have very small exposure (mostly debt related) but for the most part am squarely on the sidelines.