Should You Sell the Rip?

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3 years ago
6
BearMarket MarketCorrection 200WMA Markets Money Investing

(6/14/22) Markets have officially declined more than 20%--the arbitrary measurement that defines a "bear market," but what does that really mean? (It's FELT like a bear market for the past several months!) Markets are not two standard deviations below the 50-DMA, a point from which markets have previously bounced. "Buy the Dip" is no longer in vogue--it's "Sell the Rip." The next level of resistance in the S&P will be at around 4,000; MACD and money flow indicators have reversed from "buy" to "sell" signals, all suggesting markets will go lower over the next few weeks. So, what's the difference between a "technical" bear market and a real one? That's when a previous, bullish trend of rising prices is broken and begins to trend lower. What matters is the perspective you use to view these trends. While markets ARE down 21% this year, from peak to trough, we are still above the 2020 market peak, and the 200-week moving average has been where markets have found bottoms--and that trend has remained positive. What we're seeing is not a bear market but a bull market correction. Markets are more over-sold now than at the bottom of 2020 and 2018. If markets go through a more normal correction, watch for the S&P to drop down to test the 200-WMA at about 3,500 or 3,400. As liquidity exits the market, things will revert to where they should have been over the past two years, in terms of valuation and earnings growth.
Hosted by RIA Advisors' Chief Investment Strategist, Lance Roberts, CIO
Produced by Brent Clanton
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