ChartWatchers

Bearish Signals Accelerate As Dow Jones Drops 1000 Points on Friday

 | 

Ok, I was being a bit dramatic. The Dow Jones Industrial Average only dropped 981 points on Friday, not 1000. But it was another reminder that this bear market has not ended. In fact, I believe the short-term signals are pointing to much more weakness ahead.

Key relative ratios either broke down or were on the verge of breaking down as the market closed on Friday. Wall Street remains in a risk-off market environment and, until that changes, we should expect lower prices ahead. The following chart summarizes many of the current problems that the bulls face:

First, note that the S&P 500 did not break to new lows. But 3 of the 5 ratios beneath the S&P 500 price chart did lose their relative support levels and I believe this bodes poorly for our key market indices. These are all growth vs. value ratios. And they're all either breaking down or on the verge of doing so.

I'd like to look at key sectors and find some internal strength, but that's simply not happening. Every key area is weak and weakening. One particularly shocking development is that April has been the best calendar month historically over the past 16 years. Check out this seasonal chart:

If we ignore the April 2022 weakness, the month of April has seen a rising S&P 500 15 of the past 16 years. The average return in April is more than 3%, which makes the dismal April 2022 performance so much more shocking.

I've discussed the patience that this type of cyclical bear market requires. I'd love to say the selling is over, but we very likely have another 3-6 months of turbulence ahead. While we await a more bullish market environment, we should strive to learn more and more about how the stock market operates.

I'm introducing a new 3-part series on Market Timing. It's completely FREE! CLICK HERE to register for this Market Timing Series, I think you'll enjoy it!

Happy trading!

Tom

Tom Bowley
About the author: is the Chief Market Strategist of EarningsBeats.com, a company providing a research and educational platform for both investment professionals and individual investors. Tom writes a comprehensive Daily Market Report (DMR), providing guidance to EB.com members every day that the stock market is open. Tom has contributed technical expertise here at StockCharts.com since 2006 and has a fundamental background in public accounting as well, blending a unique skill set to approach the U.S. stock market. Learn More
Subscribe to ChartWatchers to be notified whenever a new post is added to this blog!
comments powered by Disqus