The Market Will Tell Us When the Bear Market Is Over

The stock market has been on a rollercoaster ride since the start of summer and believe us when we tell you it has not been a joy ride.

We have seen all the markings of a bear market for months, and the latest being a major rejection of an important trend line (200 ma in August) is just typical of the dangers one faces in this type of environment. We are all becoming loathsome and weary of this bear market, but we must understand there is no forcing an end to it.

We have hear lots of comments such as 'the bear market is over', and 'the statistics are 100% historically saying this bear market is finished'. That's not the right approach in our book, rather we will let the market tell us when it is over, and until then we'll remain cautious and vigilant until the time comes when a bull market is upon us. The good news is, that will happen at some point, it is just not now, nor in the near future.

FedEx

FedEx (FDX) came out with a surprise warning last night. This big transport name is a vital part of the economy. They are seeing slowdowns across the board, information we have been sharing from the data for several weeks now. We did not have to wait for FedEx to tell us the economy was a concern. This is going to have ripple effects as well, seeing other companies share the same concerns about demand slowdown, supply issues and overseas difficulties. FedEx said Europe and China were big problems.

Is it the tip of the iceberg? That is a good question and the answer is probably yes.

The action in the markets have been downright nasty this week. Following the hot CPI release Tuesday, we witnessed the fifth largest loss ever for the S&P (point wise). This comes after another top 10 loss just a couple weeks ago (remember Powell's speech at Jackson Hole?).

All told this bear market continues to maul the bulls who believe the time is right to be a buyer. We are adding a few dollars here and there to our portfolio names but also taking some chips off the table and cutting our losses, as we have done this week.

Today is options expiration Friday (a big one) and that means heavy volatility and high turnover by the end of the day. We enter a seasonally weak period for markets, the oscillators are down but not deeply oversold as they were in late August.

Next week brings a Fed meeting where they are expected to raise rates one more time. The debate is whether it will be 75bps or 100bps, which is being priced in currently. Today's funds rate is 2.25% and that is likely to double by the end of 2022.

Action Alerts PLUS has no position in the stocks mentioned.