Tackle Today: We’re in a Bear Market. Now What?
May 24, 2022
«History suggests a bright future.»
Traders,
Coach Tyler here. With Friday’s decline, the S&P 500 joined the Nasdaq and Russell 2000 in a bear market. Now that the large-cap-laden Index has officially entered bear country, what does it mean moving forward?
Some people think it portends a lot more pain to come. But it’s certainly not guaranteed. The fact that the S&P 500 finally tagged the bear market threshold tells you much about what has happened but very little about what will happen.
And that’s a critical distinction. Because of the current downtrend and recency bias, it seems inevitable that prices will continue to sink. But history suggests otherwise unless you think a deep recession is imminent.
The Chart of the Day shows how the S&P 500 performs in the 3, 6, and 12 months after falling 20%. The median return one year out is approximately 24%. Not bad, not bad at all.
There were three instances where stocks fell further over the year (1973, 2001, 2008), but they were all due to a dramatic economic downturn. And, well, I’m willing to bet we don’t see anything near as bloody given the strength of consumer and corporate balance sheets right now.
Stay tuned.
Video of the Day: Gino’s Gem – Activating Real-Time Paper Trading On TOS (Thinkorswim)
In today’s Gino’s Gems, Coach Gino Poore teaches how to paper trade in real-time on Thinkorswim (TOS).
Chart of the Day: What Happens After Stocks Enter Bear Market?
Here are the stats for the recoveries following all ten bear markets since 1950.
Today’s line up
Tales of a Technician: The Upside if You Buy Stocks Now
Pull up a long-term chart of any major U.S. index and identify the best times to buy. Do you know what you’ll discover? The entry points with the most upside occurred immediately following a crash or major bear market.
But they required you to have the intestinal fortitude to buy at a time of peak uncertainty.
Like now.
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