Recent Commentary and Analysis
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.
Over the next few weeks I will highlight specific stocks and industry groups that could benefit from secular growth trends. The idea is to build out a watchlist for the coming months, if not years.
It may be darkest before the dawn, but it is still pretty dark out there. Furthermore, volatility remains out of control. The S&P 500 fell 4.4% on Wednesday and the futures are pointing to a 1+ percent gap higher on today’s open. We have not seen a dull open since mid February.
There are a number of bear market rules, but the most important rule is to respect the primary trend. In this regard, I ignore bullish patterns, upside breakouts, bullish setups, support levels and bullish retracement zones during a primary downtrend.
Chartists looking to measure relative performance based on retracements can use the Stochastic Oscillator to quantify these bounces. Way back on March 1st, I posted an article to show how Chartists can quantify downside retracements using Williams %R.
Bear markets are difficult because there are big forces competing for control. The big trends are down for the major stock indexes, credit markets are chaotic, the economy is deteriorating and covid-19 is raging.
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.
Today’s report will focus on the broad market environment, namely the S&P 500. Volatility is high across the board as we are seeing huge moves in stocks, bonds (TLT, AGG), gold (GLD, GDX) and currencies (UUP, FXF).
The markets, of course, are forward looking and have already priced in a pretty bad situation. The market will at some point start pricing for a recovery, but nobody knows just how bad it will get and when the markets will begin to price in this recovery.
While the price of an index reflects what is happening on the outside, breadth indicators show us what is happening on the inside, and we all know that inside information can provide an edge. Since we are all not Senators, we must use charts to find that edge
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
Most stocks and ETFs are deeply oversold and ripe for a bounce, but a bounce remains elusive. And timing such a bounce is a game for short-term traders who can watch the market intraday. This is the kind of volatility that chews up traders and spits them out.
The master ETF list here at TrendInvestorPro has 200 ETFs from every corner of the market: stocks, bonds, commodities, currencies, foreign indexes and a few odd balls. They, and I do mean the infamous “they”, say that there is always a bull market somewhere.
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
There were a slew of 52-week highs a month ago (Valentine’s day) and there is now a bigger slew of 52-week lows. The market went from a raging bull with a few pockets of weakness a month ago to a raging bear with only two major ETF avoiding the new low list: QQQ and XLK.
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.
Stocks are in a freefall with small-caps leading the way lower. The Russell 2000 ETF is down some 25% over the last three weeks, while the S&P 500 SPDR is down over 18%. This is set to worsen