The Market Hasn’t Done This in 20 Years
Posted July 21, 2021
Over the last two days, we’ve been outlining how the market dynamic has changed.
As a quick review:
- Last week stocks closed down on Friday (unusual) as well as down on the week (even more unusual). Moreover, they finished near the lows (very unusual).
- Certain sectors (Industrials, Materials, Consumer Discretionary) are telling us that something BAD is brewing in the real economy.
The big question today is… just how bad could things get for the markets?
To gauge that, let’s take a look at a long-term monthly chart of the S&P 500 relative to its 20-month moving average (MMA).
First and foremost, you can see that the 20-MMA is of great importance for the stock market, typically acting as a level of support during bull markets.
The second thing I’d like to point out is that the S&P 500 is EXTREMELY extended above its 20-MMA today.
The chart below does an even better job of illustrating just how stretched stocks are today. The bottom half of the chart shows the S&P 500 is roughly 20% above its 20-MMA.
This is furthest the market has been stretched above this line in 20 years.
Indeed, the only time stocks have been MORE stretched above the 20-MMA in the last THREE DECADES was at the height of the Tech Bubble: the single largest stock market bubble of all time.
Every time stocks have stretched this far above their 20-MMA, they’ve corrected to test this line. This would mean the S&P 500 falling to test 3,500 or so.
But are we going to enter a major crisis?
The Best Bear Market Indicator I Know
To determine if we’re likely heading into a major downturn, I use a tool I call my Bear Market Signal.
It’s a proprietary indicator I developed after years of back testing. One which confirmed every major bear market over the last 20-plus years.
I’ve identified the previous signals on the chart below. By using this signal you’d have avoided up to 90% of the carnage during the Tech Bust of 2000 and the Great Financial Crisis of 2008.
How does this signal work? And is it close to triggering a new signal?
To explain all that, I’ve written a special report called BEAR MARKET SIGNAL: The Secret Signal That Has Called Every Crisis in the Last 20 Years. It reveals a specific combination of technical indicators — a combination I’ve spent years developing and testing — that help me determine when the market is poised to tank.
I wrote it exclusively for my Strategic Impact subscribers. But I’d like to offer you access to it as well.
Check out my report on the forces that are currently driving this bubble in the market. And if you take me up on a trial subscription to Strategic Impact, you can get immediate access to this (unadvertised) special report as well.
Editor, Money & Crisis