Bear Market Persists

Current position for Active portion of portfolio: SELL – S.T.A.Y. Plus™

Last week the market had about a 3% decline, erasing the last 3 weeks of gains.  This very well may have signaled an intermediate top in the continuing downtrend pattern. There have been about four bear market rallies of various sizes so far this year, each of the counter-trend rallies have retraced about 50% to 61% of the previous decline. Although some of these rallies, like June-July and Oct-November, in a Bear Market can be quite impressive, however, we are still in a definite downtrend if we continue to have lower lows and lower highs with elevated levels of volatility in both directions which has persisted all year long. 

I would draw your attention to the current weekly chart below (each candle stick represents a single week; red ones are down-weeks, green are up-weeks).

The green line that is drawn from the all-time high of 4819 at the beginning of 2022 and drawn in line with the peaks of each of the larger counter-trend rally is a great visual of the downtrend. So far, this year has been a “text-book” example of the definition of a downtrend – Lower Highs and Lower Lows.  Therefore, we are going to stay invested in the inverse of this downtrend until the data proves otherwise.  Furthermore, all three of our monthly indicators are still significantly negative, so we are still in a solid SELL signal.

For a more granular visual, see the daily chart below where each candle stick represents a single day.​

Having been out of equities (stocks) since 2/23/2022 and then removing bonds going to ALL-CASH since April 11th, August 16th, we engaged the first element of the S.T.A.Y. Plus™ strategy, the equity inverse funds. Since then, the market has been down about 19% at its lows. This is exciting when markets have been moving down, the S.T.A.Y. Plus™ portfolios were moving UP!  Of course, during bear market rallies the opposite is true, however, as long as we continue in a downtrend the inverse should again serve us well in the intermediate to longer term time frame.  We also are scaling in the first application of the second phase of the S.T.A.Y. Plus™ strategy.  We will keep you posted on those results in future reports. ​