What follows the distribution phase in a bear market?

The distribution phase in a bear market typically leads to a period characterized by panic, where prices may fall rapidly. During the distribution phase, savvy investors start to sell off their holdings, often exacerbating the downward pressure on prices as they attempt to exit positions before more significant declines occur. This selling can create a sense of urgency and fear among other investors, leading to panic selling. As more participants join in selling, prices can decline sharply in a relatively short timeframe, validating the notion of panic in the market.

In contrast, the other choices reflect scenarios that are less likely to immediately follow the distribution phase in a bear market context. A market recovery with positive trends suggests a turnaround, which typically occurs after stabilization rather than immediately post-distribution. Stabilization of previous highs might imply a recovery or a consolidation phase, while increased buying interest from investors would generally occur after a period of price stabilization or when confidence returns to the market. Thus, panic selling is most accurately associated with what follows the distribution phase in a bear market scenario.