One of the hardest things to figure out as a trader or investor is this:
“Is this just a dip… or the start of a major crash?”
Buying the dip in a bull market can be a winning move.
But mistaking a full-blown bear market for a “small pullback” can lead to devastating losses.
In this post, we’ll break down how to tell if you’re in a bull market retracement vs. a full-on bear market, the key signs to watch for, and how to position yourself accordingly — short-term and long-term.
🐂 What Is a Bull Market Retracement?
A bull market retracement (or correction) is a temporary price drop during a larger uptrend. It’s healthy, expected, and often provides prime buying opportunities.
Typical bull retracements:
- Are 10–20% in size
- Last days to weeks, occasionally months
- Happen due to profit-taking, news events, or short-term macro shifts
- Eventually resume the higher-high, higher-low structure
Key trait: Price holds key support levels and then bounces back stronger.
🐻 What Is a Bear Market?
A bear market is a prolonged downtrend where prices fall more than 20% from recent highs — usually accompanied by fear, lower highs, macro weakness, and deteriorating sentiment.
Bear markets:
- Break major trendlines
- Fail to recover quickly
- Take out previous higher lows, breaking structure
- See capital rotate into safety or sidelines
Key trait: Price no longer respects support — it makes lower highs and lower lows.
🔍 How to Tell the Difference (Key Signals)
Here are the 6 core things to watch when deciding whether you’re in a bull market correction or a true bear trend:
✅ 1. Market Structure (Price Action)
Bull retracements = higher lows still intact
Bear markets = break of structure, lower lows and lower highs
Look at the daily and weekly timeframes. Is the uptrend still intact, or is it clearly reversing?
✅ 2. Volume Behavior
In a bull retracement, selling volume is weaker than the prior buying wave.
In a bear market, selling volume dominates, especially on rallies.
Watch how volume behaves during bounces. Weak volume on green days is a red flag.
✅ 3. Macro Conditions
Are interest rates rising? Is inflation spiking? Is geopolitical tension high?
These macro factors often accelerate a correction into a bear market.
In a healthy bull market, pullbacks are seen as “discounts”. In a bear market, even good news is ignored.
✅ 4. Market Sentiment
If everyone’s still bullish during a dip (e.g., “Buy the dip!” is trending), it’s probably a retracement.
If sentiment flips to fear, panic, or denial — it might be a deeper correction or bear trend.
Track fear indexes, social media sentiment, and fund outflows.
✅ 5. Break of Key Support Levels
Did price hold the 200-day moving average or lose it?
Is it breaking weekly EMAs, previous consolidation zones, or trendlines?
Losing key levels without a strong bounce is a major red flag.
✅ 6. Sector & Capital Rotation
In bull retracements, capital usually rotates between risk-on assets (e.g., tech → value).
In bear markets, capital rotates into bonds, cash, gold, and defensive sectors.
If all sectors are red and correlations spike, that’s a classic bear signature.
📊 Example: Bitcoin Retracement vs Bear Market
- Bull Retracement (2020):
Price dipped 18% after a rally, held the 21-week EMA, and bounced to new highs. - Bear Market (2022):
Price broke key levels, lost $30K support, made lower highs, and fell over 70%.
Same asset — totally different outcomes.
The difference? Structure, macro, volume, and sentiment.
📈 How to Trade Each Scenario
🔄 In a Bull Market Retracement:
- Look to buy support or dips on volume bounce
- Use Fibonacci retracements (0.382 to 0.618) for entries
- Scale in with tight stop-losses under structure
- Use momentum tools (RSI, MACD) to confirm reversal
🛡️ In a Bear Market:
- Reduce risk
- Avoid longing random dips
- Consider short setups, inverse ETFs, or cash positions
- Focus on capital preservation, not home runs
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Don’t trade based on hope or fear — trade with data and confidence.
⚠️ Disclaimer:
This content is for informational purposes only and does not constitute financial or trading advice. Always do your own research and consult with a licensed professional before making investment decisions.
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