I placed this article on the Destiny Solutions board and thought I was catching the Economist in a mistake on NASDAQ and S&P 500 downdrafts. But Denny reminded me over there that I was probably a day behind The Economist (a UK publication) and so it was.
The Economist headline: A new bear market in American shares
Could the sell-off raise the danger of a recession?
America’s bear season, when hikers are advised to stay on their trails and carry pepper spray, runs for two months from September. It has come early for investors. The s&p500 index of leading American stocks has fallen by 18% from its all-time high in January, ten percentage points of which was in the past month alone. The index is flirting with bear-market territory, a 20% decline. The nasdaq, a tech-heavy benchmark, has plunged well past that level. Since November it has shed 29%.
For 18 months or so, since inflation began to climb, investors have fretted over how much the Federal Reserve would tighten policy, and how painful that would be for asset prices. The latest rout, which followed a meeting of the Fed on May 4th at which America’s central bank raised rates by 0.5 percentage points, offers an answer: very painful.
The market expects the Fed to raise interest rates by another 1.9 percentage points this year, even as it shrinks its balance-sheet fast. And the more entrenched inflation becomes, the more aggressive the Fed will have to be. Worryingly, American households expect inflation to be above 6% a year from now and almost 4% in three years, according to a survey from the Federal Reserve Bank of New York on May 9th.
Anyway, this article set me to work bringing up two different snapshots of the $COMPQ or Nasdaq Composite.
Instead of sending you to my Twitter thread - which some of you have problems with as you don’t understand how Twitter works - I’ve taken the time to put everything from this thread on one page for easier reading.
I wrote this thread for the youngsters on Twitter who think the Nasdaq crash of today is over and done. My threaded post could also help some saucy hypergrowth types here on Fool who believe for the fourth or fifth time in as many months that “the bottom is in.”
First paragraph from my tweet thread and the charts will magically appear here already formatted and on one page. You people are smart enough to just view the charts and understand what I’m getting at, but, still I’ve added a bit of bluster to smack some thinking into the heads of these meme pumpers on Twitter.
1) A history lesson in $COMPQ screenshots for all the youngsters thinking their hypergrowth stocks have bottomed. View this screenshot of the monthly chart for the NASDAQ starting from Dec. 1998 going through Dec. 2003:
p.s. This might very well be a bottom. But I doubt it. Not with all the breakdowns happening in the S&P sectors at this moment. And what I did not mention in this thread was how the S&P didn’t crash as hard as the NASDAQ, it did, however, lag the NASDAQ in finally crashing back in 2000, as it is lagging now, but slowly breaking one trendline after another in certain sectors.
Which brings me to share this:
The weekend wrap up for the S&P 500 $SPX and its Eleven Sectors as of End of Week #19, 13 MAY 22: (Note my post on Fool had the wrong date and Week number, but it is for this past week as stated above.)
All of this end of week stuff I do is a load of work, but, the discipline is very good for my trading mind.
That said, the Nasdaq could fall a lot farther than it has right now. See the charts. And keep in mind all the Macro stuff you kids here pile up as “headwinds.” I think Wendy’s round up of news on this weekend in particular correlates like jigsaw puzzle pieces snapping into place with the smartest people I follow on Twitter.