20% Bear Market Threshold in Sight
The 2022 stock market (SPY) is not for the faint of heart. It's not just the losses, but the bucking bronco wild ride that is getting us there is unsettling....
The 2022 stock market (SPY) is not for the faint of heart. It's not just the losses, but the bucking bronco wild ride that is getting us there is unsettling. At this stage there are signs that indeed stocks could approach the feared 20% sell off mark that denotes bear market. Let's talk about that possibility and recommended trading strategies to stay one step ahead of the pack. Get the full story below.
(Please enjoy this updated version of my weekly commentary from the Reitmeister Total Return newsletter).
Anybody who says they like this kind of market environment is either lying or needs to be checked into an insane asylum (pronto!).
I am not talking about the direction of stocks. This is a well timed correction in light of significant gains in hand + already existing inflation + energy shock + question marks on any potential United States military involvement against Russia.
No. The real issue is the OFF THE CHARTS volatility.
This is not the same market that I grew up with in the 1980's and 90's. Instead, this one is dominated by computer traders who can turn on a dime and apply a fire hoses worth of pressure to move the market to its will. That is why we have so many sessions with gains/losses greater than 1%. And why you can see such gigantic intraday swings.
Yes, I know there is little sense in complaining about it. That is just the way of the modern world. Thus, we learn to adapt or die. I choose the former. And in that light of adaptation the rest of this week's commentary we will discuss where the market stands…what likely comes next…and how we adapt to put ourselves in the best position to prosper.
Monday we made a slate of trades to get more defensive. This was a short term move to get to only 59% long the stock market which seems like a more logical posture given the short term negatives at play. (See 3/8 trades and related commentary here).
At this stage I see little standing in our way of a test of 4,000. That is nearly a 20% correction from the all time highs and should be a good point of capitulation to find a lasting bounce.
So I plan on taking profit on our 3X short ETF shares at that stage and then assess what to do next. Meaning, does it look like stocks will have to retest the lows…or maybe make lower lows? Or are folks ready to appreciate that this is enough pain and that we just don't have the conditions to press lower?
Just for the general amusement of it all, I want to put out this number: 3,854.90. That is precisely a 20% correction from the all time highs of 4,818.60.
I share it with you because if 4,000 is breached, that would be the next level with tremendous support. And very, very hard to imagine a drop below that point given the current state of the economy. And the still low rate environment which makes stocks the far superior investment value over cash and bonds.
I provided a much more detailed picture of my market outlook and trading plan in the POWR Platinum monthly webinar recorded Monday 3/7/22. (Watch it here >)
Reity, what would make you more bearish?
I get asked that question about 49 minutes into the POWR Platinum webinar. So you can fast forward to hear my answer on that. As well as the thoughts from options expert Tim Biggam.
But to sum it up, I would need to see a more serious fundamental deterioration in the economic environment. Like ISM Services and/or Manufacturing tipping down closer to 50 than their current perches of 56.5 and 58.6 respectively.
Note that a drop to say 52-54 is lower than now…but still the sign of a healthy growing economy. It is really knocking on the door of contraction territory below 50 that would have me much more cautious leading to the sale of more stocks in the portfolio and the purchase of more inverse ETF positions.
For now I am expecting a move down to 4,000 where we will take profits on our 3X inverse ETF. Then after a likely bounce reassess if the market is truly ready to get back on the bull for good, or if we need to retest the previous lows…or lower.
Stay flexible and ready to trade for whenever those alerts come out.
What To Do Next?
Discover my top picks for this hectic market environment.
I am referring to the 10 stocks and 4 ETFs in my Reitmeister Total Return portfolio that firmly beat the market last year. And well ahead of the market once again in 2022.
How is that possible?
The clue is right there in the name: Reitmeister Total Return
Meaning this service was built to find positive returns in all market environments. Not just when the bull is running full steam ahead. Heck, anyone can profit in that environment.
Yet when stocks are trending sideways, or even worse, heading lower…then you need to employ a different set of strategies to be successful.
Come discover what 40 years of investing experience can do you for you.
Plus see get access to my full portfolio of 10 stocks and 4 ETFs that are primed to excel in this unique market environment.
Wishing you a world of investment success!
Steve Reitmeister…but everyone calls me Reity (pronounced "Righty")
CEO, Stock News Network and Editor, Reitmeister Total Return
SPY shares were trading at $425.52 per share on Wednesday morning, up $9.27 (+2.23%). Year-to-date, SPY has declined -10.41%, versus a % rise in the benchmark S&P 500 index during the same period.
About the Author: Steve Reitmeister
Steve is better known to the StockNews audience as "Reity". Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity's background, along with links to his most recent articles and stock picks.
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