It has been a brutal stock sell off in December and so far in 2019, and MSM is telling you that we are officially in a bear market. It seems like the market is pricing in a recession, but it can be too early to say so.
The 10-year Treasury remain below 3 percent and the FED shouldn`t raise rates for the 10th time in 2019. If they push the hold button, I think the market will be happy and bullish again. Just look at the healthy job market and the strength of the U.S economy.
December 2018 was the worst December for the Dow since 1931, but if we avoid a recession I think investors are lucky to have a lot of cheap stocks. It is a China-U.S trade war, and the global economy is in a growth slowdown, but that doesn`t automatically mean recession.
We can see a support for the S&P 500 very soon, and this is also a point were investors pay for their insurance. And that is also a point were the bear market ends. Technical analysis tells us that if this is the right thing right now, a drop to around 2,300 points would likely spark a bounce from here.
Statistically, the average bear market stops right after, or right before it officially began. It remain to see that this is happening again. A closer look at the 48-month SMA, the market failed to bounce in August 2008 which led to the biggest drop since the Great Depression. The same happened in 2001.
Is this drop a new 2001 or 2008? If not, we can see a support just like it did in 1987, 1990 and 2016. The S&P 500 has lost 20,2 percent, and the Dow is down 19,4 percent, while Nasdaq is down 23,9 percent. The Russell 2000 is down 27,3 percent, so the coming days will be interesting. Anyway; this a great moment for day traders.
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