It’s now clear the summer time bear market rally is over. Now we’re descending again into bear market territory with a retest of the S&P 500 (SPY) lows at 3,636 a really possible prevalence. However is that backside or would possibly we be in retailer for much more ache? 40 yr funding veteran Steve Reitmeister shares his view together with a buying and selling plan to carve out good points because the market possible falls a lot, a lot additional. Learn on under for full particulars.
In a struggle either side combat over each inch of soil. Something misplaced in a earlier battle you attempt to win again sooner or later.
Usually the motion of the inventory market is kind of the identical. That being the place we regularly retest and reclaim key value ranges. On this case, shares have now given up nearly all of the good points from the shocking 18% rally from the June backside with a possible retest of that degree coming within the close to future.
Why is that this occurring?
Brief reply is that it by no means stopped being a bear market and the 18% rally was nothing however a 2 month detour from actuality. The longer reply, together with market outlook and buying and selling plan is shared within the up to date commentary under.
The S&P 500 (SPY) tumbled into the end line this week as poor financial knowledge coupled with a FedEx earnings warning crippled shares. It seems we at the moment are retracing our steps again to the June lows…and doubtless decrease.
One of many causes for that was the stunning unhealthy FedEx earnings report. Sometimes no single firm will transfer the market this a lot. Nonetheless, within the case of FedEx it’s a nice proxy for the well being of commerce with far reaching ramifications.
So with a 40% earnings miss + removing of steering as a result of the outlook is so unhealthy and unmeasurable + CEO saying worldwide recession coming = buyers headed for the hills.
Again to the half about unhealthy financial knowledge this week…
Nicely, the slate of studies on Thursday alone made the Atlanta Fed GDPNow mannequin tumble from +1.3% to solely +0.5% for the present quarter. Notice that again on 9/1 that mannequin was pointing +2.6% GDP development. That’s falling very far…very quick, which is most definitely not a optimistic for what comes subsequent as sometimes this stuff are a press release of momentum…and it’s selecting as much as the draw back.
Probably the most fascinating a part of what we discovered on Thursday is that retail gross sales had been ONLY up due to inflation…however since development decrease than inflation, then net-net exhibits weak point in demand. This together with extra unhealthy information on imports/exports had GDP estimates diving…and share costs heading decrease as soon as once more.
As if the basics aren’t unhealthy sufficient, the Thursday shut under 3,908.19 for the S&P 500 (SPY) equated to a brand new Promote sign from the famed technicians at TheDowTheory.com. Their bearish calls are just about the perfect within the technical evaluation enterprise.
There’s not a lot else to report between now and Wednesday as buyers await the Fed price determination. Will or not it’s 50 or 75 factors?
WHO FREAK’IN CARES!!!
The myopic brief sightedness of most funding information is criminally insane. Thus, please pay no heed to cost motion that day. The one factor the Fed may say to get the bulls again firmly in cost is that price hikes are over and the struggle over inflation has been received.
However that’s not going to occur. Not even shut.
That’s as a result of the Fed already instructed us only a couple weeks again from Jackson Gap that’s NOT within the playing cards. And that we have now a long run combat to beat down inflation and it WILL trigger extra financial ache.
And sure extra financial ache means worse that the +0.5% GDP estimate for Q3. It means possible recession which incorporates rise in unemployment. That isn’t being served up at this second however will possible take prime billing within the months forward. And with it the bear market ought to press decrease.
Now let’s discuss key value areas on the way in which down for the market/S&P 500 (SPY):
3,855 = 20% down line from the all time highs. That means the purpose that separates bull from bear territory. That got here into play at this time with some help and little bounce on the end line. Sure, it could present help a short time longer…however little question going to fold in due time.
3,636 = the June lows. Hardly ever can you will have a bear market with out retesting the lows. So that’s possible the following level of help as we discover the true depths of this bear market.
3,373 = 30% down from the all time highs. Seemingly there might be some of us beginning to backside fish round there. I’ll do this as nicely.
3,180 = 34% decline from the highs which is in keeping with the common decline of a bear market.
3,000 = Very fascinating psychological degree of help. It might be exhausting to go decrease than that except it really seems like a a lot worse than regular recession. And sure, we could by no means make it down right here as there might be plenty of shopping for exercise between 3,180 and three,373.
Notice that valuations bought stretched on the way in which up on this bull market (due to extremely low bond charges making shares so rattling enticing). Since true, then certainly shares could should fall additional than common to search out backside.
That could possibly be a visit down to simply 3,000. Perhaps a contact decrease.
Simply do not forget that NOBODY rings a bell on the prime or backside. It is not going to be straightforward. And might be exhausting to do within the second as a result of we’ll wish to begin backside fishing when the whole lot seems horrible (economic system…value motion and so forth).
However certainly with the inventory market it’s at all times “darkest earlier than the daybreak”.
Or just it turns into Warren Buffett time to…”be grasping when others are fearful”.
You now perceive why the bias has pushed bearish as soon as once more. And sure, you additionally perceive from the 18% July/August bear market rally that the highway to backside is not going to be straightforward. It requires endurance and self-discipline.
It additionally requires a plan which we have now and can proceed to refine because the info dictate. That means we’ll regulate our plan accordingly with circumstances.
What To Do Subsequent?
Uncover my hedged portfolio of precisely 9 positions to assist generate good points because the market descends again right into a bear market territory.
And sure, it has labored wonders for the reason that Fed made it clear there may be extra PAIN forward which had shares tumbling from current highs above 4,300.
This isn’t my first time using this technique. Actually, I did the identical factor on the onset of the Coronavirus in March 2020 to generate a +5.13% return the identical week the market collapsed -15%.
In case you are absolutely satisfied it is a bull market…then please be happy to disregard.
Nonetheless, if the bearish argument shared above does make you curious as to what occurs subsequent…then do contemplate getting my “Bear Market Sport Plan” that features specifics on the ten positions in my hedged portfolio.
Wishing you a world of funding success!
Steve Reitmeister…however everybody calls me Reity (pronounced “Righty”)
CEO, Inventory Information Community and Editor, Reitmeister Whole Return
SPY shares rose $1.49 (+0.39%) in after-hours buying and selling Friday. Yr-to-date, SPY has declined -18.22%, versus a % rise within the benchmark S&P 500 index throughout the identical interval.
Concerning the Writer: Steve Reitmeister
Steve is healthier identified to the StockNews viewers as “Reity”. Not solely is he the CEO of the agency, however he additionally shares his 40 years of funding expertise within the Reitmeister Whole Return portfolio. Study extra about Reity’s background, together with hyperlinks to his most up-to-date articles and inventory picks.