Take a Look at What's Going On in the Stock Market
A picture being worth a thousand words, let's take a look a what's going on in the stock market. One caveat: I'm not a technical analysis expert and won't comment as if I am. I'm just going to look at this along with you and see if we can make some sense out of it.
This 6-month looks chart "says" that stocks were higher 6 months ago. Prices started dropping in October and November. Then they really dropped (crashed?) in December. And, of course, you remember that it was the worst December price drop since the Great Depression.
Of particular interest: The "resurrection" of stock prices that began with the record-setting jump of 1,000 points on the day after Christmas has taken prices up, and rather dramatically. But while the rise has been dramatic - some feel as dramatic as the collapse in December - prices still remain below where they were when the December fall began.
Additionally, note that, after some struggle, prices dropped decisively below the 200-day moving average with the December drop. Some consider this a time to get out of stocks. In addition, the 50-day moving fell below the 200-day. Finally note how the rising price crossed back above the 50-day moving average, but was "repelled" as it approached the 200-day moving average. Unless the price manages to rise above the 200-day pretty soon, it confirms its recent bearish development.
So looking at this chart, we might conclude that, despite the recent dramatic rise in price since the end of December, the price action remains bearish overall.
One benefit from this analysis: Don't get sucked into focusing on current price (daily, weekly) price changes. If you did that recently, you could "feel good" about stocks when there's no particular reason to do so.
Now let's expand our time horizon.
This chart goes back five years. We get a wider perspective. That perspective basically reinforces the shorter-term chart re the moving averages. Can we glean anything more from this chart? Yep.
First, notice that this chart shows bull market action over the last five years with the trend basically being up. Now, there's some correction action in 2015-2016. There we see two instances of patterns similar to what we've got now: prices drop below the 50 and 200 day averages, 50-day drops below the 200. But see how rather quickly prices recover. The fact that the pattern occurred twice, but prices wound up resuming their bullish trend revealed the strength that remained in the bull market.
The question I'm asking now: Will that reversal to a bull pattern occur again? I think we've got to wait on the answer - that is, if your only gauge are these sorts of charts. Other evidence, though, does point to a bear market in the making, something we've noted recently. That evidence wasn't present in those past corrections in 2015-2016.
But, still, pictures do help to in their own way to make sense out of recent developments. You just can't take them simply at face value.
This 6-month looks chart "says" that stocks were higher 6 months ago. Prices started dropping in October and November. Then they really dropped (crashed?) in December. And, of course, you remember that it was the worst December price drop since the Great Depression.
Of particular interest: The "resurrection" of stock prices that began with the record-setting jump of 1,000 points on the day after Christmas has taken prices up, and rather dramatically. But while the rise has been dramatic - some feel as dramatic as the collapse in December - prices still remain below where they were when the December fall began.
Additionally, note that, after some struggle, prices dropped decisively below the 200-day moving average with the December drop. Some consider this a time to get out of stocks. In addition, the 50-day moving fell below the 200-day. Finally note how the rising price crossed back above the 50-day moving average, but was "repelled" as it approached the 200-day moving average. Unless the price manages to rise above the 200-day pretty soon, it confirms its recent bearish development.
So looking at this chart, we might conclude that, despite the recent dramatic rise in price since the end of December, the price action remains bearish overall.
One benefit from this analysis: Don't get sucked into focusing on current price (daily, weekly) price changes. If you did that recently, you could "feel good" about stocks when there's no particular reason to do so.
Now let's expand our time horizon.
This chart goes back five years. We get a wider perspective. That perspective basically reinforces the shorter-term chart re the moving averages. Can we glean anything more from this chart? Yep.
First, notice that this chart shows bull market action over the last five years with the trend basically being up. Now, there's some correction action in 2015-2016. There we see two instances of patterns similar to what we've got now: prices drop below the 50 and 200 day averages, 50-day drops below the 200. But see how rather quickly prices recover. The fact that the pattern occurred twice, but prices wound up resuming their bullish trend revealed the strength that remained in the bull market.
The question I'm asking now: Will that reversal to a bull pattern occur again? I think we've got to wait on the answer - that is, if your only gauge are these sorts of charts. Other evidence, though, does point to a bear market in the making, something we've noted recently. That evidence wasn't present in those past corrections in 2015-2016.
But, still, pictures do help to in their own way to make sense out of recent developments. You just can't take them simply at face value.
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