It’s finally caught up to me… I’m at home, sick in bed – sick from too much travelling, on too many planes.
That said, I’m in good company. I think I feel exactly how the market does. Heaven knows it’s been up and down enough, too, which would give anybody a headache and weaken their stomach.
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In its rapid and flighty ups and downs, its immune system has been compromised, and it’s sick, too.
The leadership stocks are all in trouble. In fact, there is no leadership.
Politics – domestic and international – are weighing on markets. Every day, more “news flow” weakens the aging bull market. Call it headline risk.
Now, something like half of S&P 500 stocks are in a bear market. The broader market, not so much. And the truth is, we may not get there.
But I’ll let you in on a little “pro” secret about bear markets – one you won’t hear on television.
Stay Put… and You Risk Missing the Profit Trend
The “official,” “classic,” “textbook” – whatever you want to call it – definition of a bear market holds that stocks, bonds, oil, coffee – whatever – has to have declined by at least 20% from peaks for at least two months.
Here’s the problem with that, though. A really big one: If you stick around waiting for a 20% plunge before you change your moneymaking tactics, you’ll wake up to find your portfolio on life support.
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I’m talking critical condition, here. Even worse than I feel right now.
So, even though from a technical perspective we may not ever enter “official” bear market territory, smart traders and investors will make moves based on the trend – that is to say, the path of least resistance – that market psychology “wants” to take.
And right now, that path is headed due south. Straight down. Doesn’t it “feel” like this market is sick enough to be brought to its knees and thrown into bed for a while?
It’d be terrible mistake to try and fight this trend, so it’s going to pay to be bearish right now.
To be sure, I’m seeing some bullish signals here and there, and we may yet see some stocks catch the bid as prices become too good to pass up, but overwhelmingly, stocks want to go lower.
In my Money Zone trading research service, for instance, we’re making beaucoup bearish bets – like on the PowerShares QQQ Trust (NASDAQ: QQQ), which returns the inverse of the daily NASDAQ moves. I expect we’ll clean up there. That makes a great hedge against downward moves, too.
Until prices and sentiment show me otherwise, the old bull market is a dead duck. The bears have the upper hand, and I’m going back to bed.
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