Although the major indexes have yet to fall 20% from their highs and enter a technical bear market, the vast majority of stocks have been in a bear market for a while.
Of the 5,500 stocks in the market that are not micro-caps, about 3,400 or 62%, are more than 20% off their highs and 3,700, or 67%, are below their 200-day simple moving average. Certain sectors such as biotechnology, cannabis, and growth stocks are even deeper into misery.
Some folks will quibble over the definition, but this is bear market action, and we are wallowing in it right now.
There is no mystery why the action is so poor. Bonds continue to struggle as yields rise, and the Fed contemplates a half-point hike at its next meeting. The war in Ukraine is dragging out, supply-chain issues continue, Covid is still impacting Asia, and worries about a recession are building.
We have a lousy macro-economic environment, and the price action is very poor. That is exactly what a bear market feels like.
The best course of action is to simply embrace the fact that the market is poor. No predictions or arguments need to be made. The market is struggling, and the vast majority of stocks are acting poorly.
It is a very tough slog, and it will push many folks to give up. They are worn out by the failed bounces, poor action, and stock picks that can't gain sustained momentum.
This sort of action is just the nature of the beast at times. The only thing certain at this point is that it will eventually shift. There is no way to know when or from what level, but the doom and gloom will eventually lift, and the market will reward those that stuck around and kept on slogging away.
In the short term, we have such extreme negativity that we have to consider the potential for some sort of counter-trend bounce, but the price action is still extremely poor. We need better action even for some quick trades while the bigger picture clarifies.
Embrace the fact that this is a bear market and don't try to fight it. That is the way you deal with a market like this.
