What happened last week.
What we're watching for
next week.
"It just keeps getting worser and worser." - paraphrasing Alice in Wonderland
We have now given up all of the gains we made in 2018, and all of the gains from the last 12 months. As I've said before, it's not only the money that's lost in a hostile market environment, it's also the time lost.
We all know that time is a precious resource and we can never get back lost time. Well, we just lost an entire year of stock market gains, and we can never get it back. Some day we will make a new high in the market, but when? After the crash of 1929 it took investors 25 years to get back to even. I'm not sayin', I'm just sayin'.
Let's go through the numbers to find out how bad things are right now. Let me stipulate that I am not an outright bear at this point, but I'm finding fewer and fewer reasons to stay optimistic about the coming 12 months.
Chart 1. S&P periodic returns.
Compare the periodic returns as of last Friday to the same readings from 8 weeks ago when the market began to misbehave. I don't have to tell you that the market is struggling to stay above water. The rally of 2018 is now gone, and it's an open question whether the market can regain the high ground at 2,930 for the S&P 500.
Look at the 3 month numbers on both charts. We've gone from up 3.6% 8 weeks ago to down 8.5% today. That's a significant move in such a short period of time.
This Week
8 Weeks Ago
Key Markers
Now compare the distance from key markers as of Friday, versus the same numbers from 8 weeks ago. The support price I'm using is 2,581 which is the low price we reached during the last correction in January-March of this year.
We are now just 2% above that level, but as I said, in a fluid market like the one we're in right now, anything can happen. If we break 2,581 I'm going to become quite annoyed, and there's no telling what I may do.
Chart 2. Distance from Key Markers
This Week
8 Weeks Ago
Chart 3 - chart of the week
Well, we finally did it. We reached the dreaded Death Cross for the S&P 500. The 50 day moving average is now below the 200 day. What does it mean? Not much, really. But chartists and pundits will be running around like their hair's on fire.
Chart 4. The Market Dashboard
By now most of you have become familiar with the Market Dashboard. What we see this week is a market that is struggling on many technical fronts, but on a fundamental basis the market isn't in very bad shape. Earnings, employment, and inflation are still favorable. But market participants appear to be sensing a change in the atmosphere. We'll keep tracking the numbers to verify what's happening under the surface.
Final Thoughts
It's getting harder to stay invested in this market, but that's the best play for now. It's o.k. to raise a little more cash so you can take advantage of opportunities that come along. The next recession is coming, but not right away, and as long as that remains the case there is no urgency to bail out of stocks.
For a full analysis of the probability of a bear market or a new recession, see my Monthly Intelligence Report.
As always, if you like what you see, or have suggestions for improving this recap, leave a comment below, or email me at info@zeninvestor.org