Are You Ready For The Coming Bear Market?
Like the Titanic, the Equity Markets make very slow turns. It’s hard to say whether it still has more upside. It’s not hard to at least make a case that we are now at, near, or passed the top for equities. As we pointed out in the last two issues, (https://markonomics101.com/2018/10/02/is-the-stock-market-schizophrenic-or-bi-polar/) and (https://markonomics101.com/2018/10/01/stock-market-schizophrenia-markonomics101/) the “fracturing” between indexes and industry sectors was clearly evident and not the signs of a healthy BULL MARKET.
The Interest Rate Time Bomb Just Blew.
Asset values are dependent on the overall level of interest rates. Higher interest rates REDUCE the value on any asset. Yesterday and today, the level of interest rates surpassed critical levels outlined in our prior pieces (https://markonomics101.com/2018/09/20/the-interest-rate-bomb-is-the-fuse-now-lit/) and (https://markonomics101.com/2018/09/26/inflation-suddenly-the-signs-are-everywhere/). The picture appears clear that rates are heading higher and will surely be of use to the BEAR.
Stocks Head Lower In Unison.
For a change, all horses galloped in the same direction, today. Not a sign of Schizophrenia or Bi-Polar disorder, in sight. Note the incredible similarity among the Dow Jones Industrial Average (DOW), the Standard & Poor’s 500 Index (SPX), and Nasdaq 100 (NDX). The Russell 2000 Small Capitalization Index (RUT) is farther along than the others, down already about 5% off its highs.
It is best to avoid these kinds of risky market conditions. The tendency for these types of patterns (such as Ascending Wedges) to precede with sudden, large moves, especially adverse moves, is high. In an Ultra-High Risk Environment for Equities, (https://markonomics101.com/2018/09/22/mr-market-and-ultra-high-risk-for-equities/) it is critical that anyone still playing, carefully weigh upside potential versus downside risk. This a HUGE asset bubble. As it now pops, the potential for adverse, finance consequences are rising, as the BEAR now looms on the horizon.
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