As our analysts presumed last week, we were probably witnessing the “initial” phase of a long-term downtrend for Wall Street.
Of course, we can not yet be sure that the long-term market downtrend has begun, as this is only a preliminary correction in the markets. But signs do point to it.
DOW just joined S&P 500 in the club of bear markets. The S&P 500 Index has seen 26 bear markets since 1928. However, there have also been 27 bull markets, and over the long run, stock prices have increased tremendously. Bear markets, unlike a big reversal, are part of the normal cycle of the markets, but they can occasionally get much worse and, at times, turn into a reversal.
Crashes are uncommon, but they typically happen after a prolonged upward market trend. 2020 saw the most recent stock market crisis as COVID-19 expanded internationally. During the week of February 24, the Dow Jones and S&P 500 fell 11% and 12%, respectively.
2022, as we are witnessing, is undergoing a bear market and has been grating for Wall Street. Here is a graph that shows the S&P 500’s monthly chart.
When we say a long-term downtrend, we mean that the market will be declining for months and continue to fall significantly. It’s not surprising if the S&P 500, from here, could be setting its sights on 2177.62.
On September 13th morning, we saw a tumble in stock futures after CPI for August came in higher than anticipated. It was the worst day for the stock market in 2 years.
According to reports, monthly headline inflation rose by 0.1%. Core inflation rose 0.6% in a given month. The figures were undoubtedly disappointing. According to economists, core inflation would increase by 0.3% while headline inflation would decline by 0.1%.
Earlier today, Jim Boykin further stated, “For sure, the market was trying to say something. The investors realized that inflation, currently at 40-year highs, is not going to fall that easily. In September, the Fed was all set to increase rates for the third time in a row, and the bears got a stronger signal with the hotter-than-expected(not that hot) CPI report.”
If the S&P 500 remains in the 3637.46 to 4327.51 range for the next few months, a breakdown could potentially start a long-term downtrend.