Market Notebook

by | May 8, 2022

Discussion – 

Despite tremendous volatility, equity prices, as measured by ticker SPY, closed on the week at about where they started. The price support area, as established by the February 24th lows, held for a second week. It is therefore possible to consider SPY as remaining in consolidation. The best possible outcome would be for consolidation to continue. A breach of the February 24th lows would cause SPY to be considered in a downward trend. Last week’s price action was somewhat bearish, and a move lower during the next week is a distinct possibility. Bargain hunters beware. Consider using position size and stop orders to limit downside risk.

NASDAQ stocks can be considered in a bear market that began on November 19th of 2021. This would be the 18th bear market for the NASDAQ since 1973. The statistics are interesting. The average drawdown was 35%. The median drawdown was 32.5%. The average length was 198 days, with the median length being 120 days. The current bear market is about 168 days old, with a drawdown of about 24%. The statistics suggest that we may be closer to the end of the NASDAQ bear market than the beginning. Make your list bargain hunters.

Generally speaking, equities are being priced by pessimists, and that’s OK. That’s the way it should be. However, one of these days, equities will begin to be priced by optimists. Prepare for that day.

Bonds, as measured by ticker BND, remain in a downward trend. The story in bonds is much the same as in past weeks. It appears prudent to avoid bond purchases during the coming week unless necessary.

All the best during the week ahead!

Disclaimer: Nothing in this discussion should be considered investment advice. The content of this discussion is strictly my personal opinion and subject to change at a moment’s notice. Investment advice can only be provided to you by your investment professional and not by a general market discussion such as this one. If you wish to speak with an investment advisor, contact us. We can probably help.