The BEAR MARKET For Equities Shifts Into High Gear (Charts of the Day 5)

Equity Indexes All Make New 52 Week Lows

Following the expected interest rate hike yesterday, EVERY MAJOR STOCK MARKET INDEX MADE NEW 52 WEEK LOWS.   The anticipated BEAR MARKET is asserting itself with a vengeance.  Nearly 1000 stocks made new lows as well.  This is NOT a “Correction”.

Many observers continue to fail to observe what is becoming more obvious. The Wall Street definition of BEAR MARKET is a decline from highs of 20 % or more, whereas a “Correction” refers to 10% drops.  Under this “arbitrary” rule-of-thumb, most indexes are still just “Corrections” in an ongoing Bull Market.

Using the 20% criterion, only 3 indexes are in “BEAR MARKETS”.  Small Caps and Transportations have fallen into “official” Bear territory, while the majority of indexes have yet to drop the requisite 20%.

The Slide Show below shows the extreme technical damage now suffered by the major equity indexes.

The key takeaways from the Charts are the following:

  1. The Equity Indexes are now all in Sync on the downside.  Each has broken key support levels which tracing the same topping pattern we’ve observed all throughout the markets.
  2. The larger capitalization indexes have entered what we refer to as the “Waterfall Zone”.  This is a trading “air pocket” created by NEW Support levels WELL BELOW the ones just broken.  The indexes have unusually high risk of losing another 15-30% IN A HURRY.
  3. Smaller Capitalization stocks, which led on the upside, are now the leaders on the downside.

“Stock Markets Poised For Waterfall Decline?” (https://markonomics101.com/2018/12/09/stock-markets-poised-for-waterfall-decline/).

Stock Market Indexes Have Retraced Much of Their Post-Election (2016) Rally

Because of the reluctance by Wall Street analysts to use the term “BEAR MARKET”, most investors still believe this is just another “Correction”.  The Dow Jones Industrials and Standard & Poor’s 500 are still within 15% of their all time highs.

Some indexes, such as the New York Composite, S & P Midcap and Russell 2000 have retraced nearly their entire gain since the 2016 Election, when stocks took off and never looked back.  The Russell 2000, for example, has RETRACED 80% of its nearly 2 year advance!

The Table below summarizes the performance and behavior of the Major Equity Indexes to date:

                                                                                                                                                                                         Change   From

  Index                            Nov. 2016                       High                        Dec. 19th Close                              High                 Nov. 2016    

Dow Jones Ind.             18,500                            27,000                            23,323                                         -14%                         +26%      

S & P 600 Midcap          1,550                                2,050                               1,666                                         -19%                          +7.5%

Nasdaq 100                    4,800                                7,700                               6,341                                         -18%                          +32%

New York Comp.         10,750                              13,000                             11,372                                         -16%                           +5.8%

Russell 2000                   1,250                                1,750                                1,349                                         -23%                           +7.9%

S & P 400 Sm. Cap           750                                 1,100                                 840                                          -24%                           +12.0%

S & P 500                         2,150                                2,950                              2,507                                          -15%                           +16.6%

Dow Jones Trans.        8,100                               11,500                              9,148                                          -20%                          +12.9%

Wilshire 5000              22,500                              30,500                           25,703                                          -16%                           +14.2%                                    

Don’t Be Misled By Wall Street Analysts Peddling “Bargains”

One advantage of being as old as the hills is having lived through many BEAR MARKETs and even Crashes.  However, many on Wall Street  have NEVER experienced one.   We inform, we don’t sell and don’t mislead.

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