Market Notebook

by | Jun 26, 2022

Discussion – 

Equity prices, as measured by ticker symbol SPY, rallied nicely last week, while bond prices, as measured by ticker BND, also posted gains.

SPY rallied to close the week into an area of price resistance on the daily chart. Although it is great to see SPY off the lows, one should likely assume recent price action is a bear market rally rather than a turning point for SPY. One would likely need to see some follow-through in SPY price action to consider SPY as moving into consolidation.

In reviewing the bear market statistics section of the market notebook, one might note that the S&P 500 is roughly 173 days into its bear market. The average bear market for the S&P 500 is 285 days, with the median being 240 days.

The situation for the NASDAQ is slightly different. The NASDAQ entered its bear market before the S&P 500. The NASDAQ Bear market is 218 days old, with the average being 201 days and the median being 120 days. It seems reasonable to believe that the NASDAQ will lead the recovery once equities consolidate and then move towards a new bull market phase. Just note that price recovery could still be a bit into the future.

Within the economic indicator section of the market notebook, it should be noted that the high yield option-adjusted spread indicator has ticked into the red. Is this a sign that the US economy will tip into a recession? It is hard to say. One indicator moving into the red is not sufficient to conclude recession is inevitable. Stay tuned to find out if more indicators tip into the red.

For those needing to deploy capital in the coming week, caution appears warranted. As mentioned, one should likely assume recent price action represents a bear market rally rather than consolidation. It, therefore, seems prudent to make equity or bond purchases in the coming week only as necessary or if specific opportunities become available.

All the best in 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.