When will this Bear Market End?
Jun 13, 2022On Friday of last week the market sold off hard after CPI data came out higher than expected suggesting that inflation was still not under control. The Consumer Price Index (CPI) measures the monthly change in prices paid by U.S. consumers. See Investopedia for more information. That measurement came in at 1% vs expectations of 0.7%. The Fed absolutely has to do something to curb inflation and fast.. Unfortunately that means higher interest rates and further tapering of bond buying which is removing liquidity from the markets and in the meantime killing the stock market.
So far we have undercut the follow-though day and the May low rally day as sell signals continue to mount. The Nasdaq sliced through the 20 EMA on Thursday and followed-through with additional selling on Friday and Monday as the market broke badly on heavy volume.
Interest rates continue to climb as the TNX 10-year treasury yield. As of today it has climbed up to 3.36% and clearly running contrary to the market.
All of the Nasdaq big 6 heavyweights have broken through their moving averages signaling short sale opportunities. AAPL, NVDA, TSLA, GOOG, MSFT, AMZN, JPM and META all broke their 21 EMAs and triggered short sale entries.
AAPL
NVDA
TSLA
GOOG
MSFT
AMZN
JPM
META
You could have also shorted the indexes by taking a position is SQQQ or other inverse ETF when the Nasdaq also broke through the 21 EMA.
So when will this end? Historically, bear markets end when everyone has thrown in the towel. Bulls have stopped trying to find a bottom and bears don't think it can go any lower. Historically this has take three to four legs down. If we consider this recent downturn the third leg, after we undercut the prior lows from Sept. '20, the next potential support area is the high just before the COVID crash. That would take us about 10% lower than we are now. While there are shorting opportunities and money can be made. If you are not a skilled short sale trader, then it is best to sit this one out until a definite bottom has occurred.
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