There has been a lot of debate over the past few weeks. Investing experts have been taking sides, are we in a bear market rally or have we already found a market bottom and begun a new bull run? The answer is in. We enjoyed a rally within a bear market, and it’s over. That’s right, I’m calling it. Just as there are corrections within a longer running bull market, there are rallies within bear markets. In my post on August 9, 2022, entitled “Yield Curve Inversion”, I put forth my own opinion – that we were already in a recession. This afternoon reinforced that notion.
Federal Reserve Chair Jerome Powell uttered words this afternoon at a central bank symposium taking place in Jackson Hole. Must be nice. He said absolutely nothing different than in his last few press conferences. His carefully chosen words caused a significant sell-off in the afternoon.
Where Are We Going?
I rarely do any sort of technical analysis, because at best, it only has application in the short-term. Otherwise, I find it useless, but entertaining. Plus, I have to say, just putting some lines on this 5-year chart of the S&P 500 Index took far too long. First, note the green line, a 10-week simple moving average. That little uptick in July is the bear market rally. Now, note that the weekly price action failed to get above and stay above the purple line, the 40-week simple moving average, that represents the prevailing trend. It hit that ceiling and bounced back like that kid on the fence in Jurassic Park.
I dropped in a trend line of the low points in this recent trend and took it down to a support level the S&P last hit immediately after the pandemic recovery. I think we’ll likely burn off another 20% falling to somewhere around 3,200 before the end of the year. That would put us at a 33% drop from the all-time high, a very nice bear market, appropriately reflecting the economic recession we’re already in. No one is going to accuse me of being a cockeyed optimist.
What Should We Do
In markets like this, growing one’s investment account is a Sisyphean pursuit, just when you feel like you’re getting some traction, you go flying backwards. Eventually though, discipline and compounding will overcome. Royal Dividends will never take action based on someone’s words at a press conference. We will continue to invest in the Dividend Kings that are the most attractively priced and when the dividends roll in, we’ll reinvest those.
Come back this weekend to find out which Dividend King will be the next to join the Portfolio for the Ages.