The S&P 500 went from a historic decline to a historic bounce to an above average drop. This key benchmark fell 33.9% in 23 days, surged 17.55% in three days and then dropped 5.25% the last four days.
For the third time in 20 years the stock market fell by more than 30%. As noted in the study of bear markets, the S&P 500 fell around 50% in 2002-2003 and 2008-2009. Folks are calling this a generational opportunity, but this is the third such opportunity in the last 30 years, which covers a generation.
It’s raining money so today we will cover a couple of bond ETFs, the credit markets and the Fed. In particular, I will highlight the current dislocation in the credit markets using the 20+ Yr Treasury Bond ETF and Corporate Bond ETF. We will then look at credit spreads and note that these spreads often peak ahead of a stock market bottom.
Breadth indicators are also referred to as market internals. As the “vital signs” for an index or sector, breadth indicators reflect aggregate performance for the individual components. As such, breadth indicators can provide leading signals by strengthening before a bottom or weakening ahead of a top. After all, the whole is only as good as the sum of the parts
In general, I am not a fan of price targets or projections because they are very subjective. Instead, I prefer to identify the trend in a systematic and objective manner, and then trade or invest accordingly until proven otherwise. The index and sector breadth models turned bearish at the end of February and
The market is oversold, but we do not need an indicator to figure that one out. There is one HUGE problem with oversold conditions right now. Yep, you guessed it. We are in a bear market. Oversold conditions alert us to possible setups in bull market environments, but not in bear market environments.