. . must come to an end
And that includes bull markets. All bull markets end, as do all bear markets. In the last blog post I warned to look out for the 10/200 death cross, and to wait for ‘white space’ between the MAs to confirm that they had actually crossed. Well, now they have – see the chart below.
The actual cross was on 18 Feb, the whitespace on 22 Feb confirmed it, so if you are following ITM rules then you should have got out today, the 23 Feb.
Walking the Talk
I ‘walk the talk’ so after the death cross was confirmed I had decided that I was getting out, but then had pause for thought as initially the market opened up. The chart below is the 1-minute intra-day chart, with the lines I was using. The green line is the support line from the previous downturn in September last year. I waited for around 15 minutes after market open to see if it would rocket up, but it didn’t so I started closing all my SPY options in my various accounts and had finished by around 10:15. And I am very glad I did.
SPY initially opened up, then the market started to slide below the support line. After 2 hours it started to rally, but was unable to sustain it. It stopped short of the support line and started moving down again. That was definitive enough for me. I stopped watching. I know that I can get fascinated and watch all day but it doesn’t do me any good! When I checked after market close the slide had continued making a long red candle. (this chart is from Schwab’s Streetsmart Edge trading platform it is made for a bigger screen)
SMA Vs EMA
Uniformly bad news I am afraid: both have the death cross. The SMA got there sooner (due to the recent non-volatile days) but both are now showing that the bull market is over for now. The heavy pink / purple lines are the EMA, the light ones the SMA.
We are now officially in correction territory. SPY at its peak on 3 January was $477.71, and its now $421.95. That’s a drop of 11.7% putting us well into correction territory. Just to keep things in perspective, here’s the chart of the last 4 years of SPY:
The Bear Hasn’t Surfaced Yet!
Just reminding you that its not a bear market yet – that needs a drop of 20%. Will we get there? I don’t know. The 2 issues shaking the markets right now are the Ukraine situation and inflation.
I have no idea how long the Ukraine crisis will last and what effect it will have. Markets hate uncertainty. I remember way back in early 2000s when the Gulf War was declared a bull market started – go figure. My only explanation was that at least people had some certainty about what was going on. Right now we have absolutely no certainty about what is happening in Ukraine.
Inflation is here for a while – its not going to go away anytime soon. What does that mean for the markets? Again I will refer you to the Calafia Beach Pundit who can talk about that with more authority than I. Here’s the link: http://scottgrannis.blogspot.com/
Where to from here?
This is the hard part – sitting on the sidelines. Hopefully the world situation will not end up as bad as it looks now, and the market can recover. Of course, there are ways to profit from volatility and I may do a couple of posts on that, but if you are playing make sure you only do it with play money!