Stealth Bear Market?

By John Del Vecchio and Brad Lamensdorf

Surprise!

Despite record highs for equity indexes, we are in a stealth bear market in the Nasdaq.

As the chart below shows, while the Nasdaq pushes higher, the percentage of stocks above their 200-day moving average is plunging. As a result, a massive divergence is forming between the index and the stocks that comprise the index.

However, the problem is not that the percentage of stocks above their 200-day moving average are falling sharply. The problem is that many of these stocks are already in bear market territory.

Look at this.

Without the five biggest stocks, the Nasdaq is in the red on the year. The market is down over 20%.

By the time the market gets around the punishing the most heavily weighted stocks in the index, a lot of damage will be done. A lot of damage has already been done. It could get much worse from here.

It may be time to stock up on hedges for the holidays once again!

Originally Posted on December 14, 2021 – Stealth Bear Market?

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