Has A Bear Market Started?

Has a Bear Market Started?

There has been talk in the trading community lately about the coronavirus triggering a bear market.  Has a bear market started?  Probably.

Richard Wyckoff wrote extensively about reading the market’s technical signs and signals to gain an advantage in investing and trading.  One of those signs is starting to unfold.

This is a quarterly chart of the Dow Jones Industrial Average (the Dow 30).  Every quarterly bar since the start of the bull market is shown.  Note the last bar.  Although the quarter hasn’t completed and this may change, thus far, this is the largest quarterly down bar since the uptrend began in the spring of 2009.

That’s not constructive for this market.  It is especially not constructive in the immediate background of a Federal Reserve ½-point rate cut (last week) and heavy additions to liquidity (via the Fed repo program operating since at least the Fall).  With all that pump-priming, this should have been an up bar reaching into the 35,000 area!  Instead, we’ve eaten into the gains made through most of 2019.  We’ve also breached the highs of 2017.

The lows made in 2018 at about 21,700 should provide some support and the quarterly highs around 27,000 resistance.  Longer-term traders can look for trade opportunities in these areas.  Given this potential quarterly change of behavior, the upside is likely to be limited and a downside below the 2017 lows appears likely over the coming weeks and months.