The average stock listed on the NYSE is down over 34% off its highs.
The new 52-week highs list peaked in February of last year – that was over 15 months ago!
We’ve now seen more stocks hitting new lows than new highs for the most consecutive weeks since the Great Financial Crisis.
The Technology, Communications and Consumer Discretionary sectors combined make up almost half of the stocks in the entire S&P500. They’re each now down 26%, 33% and 35%, respectively.
In fact, almost half the stocks on the Nasdaq have seen their prices get cut in half.
And people keep asking me if we’re going into a bear market?
What the hell do you call that?
If you define all that as a bull market, then I think you need to check yourself into a mental hospital.
Some people tell me that it’s not a bear market until the S&P500 falls by 20%.
Who made up that lie? And are you foolish enough to believe it?
Okay, so if the S&P500 falls 19%, then we’re still in a bull market. But if it falls by 20%, then it’s a bear market?
What kind of serial killer thinks that way?
Have the majority of stocks been going up for a while? Or have the majority of stocks been going down for a while?
That’s the question we want to answer as market participants in order to identify the type of market environment we’re in.
That’s what matters here.
If you believe this wasn’t a bear market just because the S&P500 hasn’t closed down 20%, then I think you have serious issues.
“But JC, we’ve always done it this way”
People who use that excuse are already destined to lose. Stay away from people like that.
At the end of the day, there’s a certain level of common sense that needs to be incorporated.
If you’re waiting for the S&P500 to drop 20% before declaring this a bear market, you’re doing real harm to yourself, your family and anyone who listens to you.
Shame on you.
Just stop it.
Forget the arbitrary 20% levels that the small-minded folks like to focus on, almost like if this 20% was some magic number in the universe.
Guess what? It’s not.
4100-4150 is the area we’re focused on.
If the S&P500 is below the March lows, then this market is still guilty until proven innocent.
We can talk about the possibility of new bull markets if we’re above that.
In the meantime, check out this potential failed breakout in the US Dollar last week. If there is one thing out there that can turn this ship around for stocks, it’s a weaker Dollar:
The US Dollar has had a strong negative correlation with stocks for the entirety of this chart above.
If the Dollar breaks out from here, then stocks have more trouble ahead.
That’s how I see it.
But if last week was the start of a US Dollar correction, I think that can spark a nice summer rally for stocks.
I’d also keep a close eye on the DJ Composite Index at 12,000. If we’re below that, then it’s a big problem for the long-only community:
12,000 in the DJ Composite is equivalent to that 4100-4150 level in the S&P500.
Meanwhile, that was 2 positive up weeks in a row for US Treasury Bonds.
The bond market not crashing is probably a good thing for stocks:
If bonds can stick the landing and find support here near those former lows, then I think that probably helps stocks too.
The US Dollar and Bonds.
I hate to be Mr. Macro guy, but from the bottom of my heart, if you have any exposure to stocks whatsoever, those 2 asset classes need to be front and center.
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