Gains, Pains & Capital: Here’s Your Roadmap For the Market’s Next Money Making Move
It’s easy to get caught in the trap of looking at the market based on calendar years. However, market trends don’t always follow the calendar. The most recent bear market is an exception, starting in early January 2022.
Since then, we’ve seen stocks drop, then rally back to a key metric such as the 50- or 200-day moving average, or just above. From that peak, a new downtrend has started.
The market’s strong performance since the start of the year suggests that a pullback is ahead. Typically, stocks have been dropping to 8-12 percent under their moving averages before finding a short-term bottom.
That suggests a modest downtrend in the market in the coming weeks, or even months. While that’s not indicative of a market crash, it is a sign that stocks have gotten too far ahead of themselves in recent weeks.
The market’s recent slowdown and shift into neutral is a sign that any short-term upside is likely over for most potential trades. And that traders can fare better with trades betting against the market in the weeks ahead.
Bear in mind that this analysis has been the case for the bear market that started in 2022. And that the moves may change in time. Any change in monetary policy, for instance, or a sign of a significant economic slowdown, could cause the market reaction to change.