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.
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