To The Moon

Summary of the indices - let us look at the macro market to understand how the markets are performing.

Are we entering a recession or a technical recession?

Forbes defines the following as a recession?

During a recession, the economy struggles, people lose work, companies make fewer sales and the country's overall economic output declines. The point where the economy officially falls into a recession depends on a variety of factors.

The business times define a technical recession as the following:

A technical recession occurs when the gross domestic product (GDP) contracts on a sequential basis for 2 consecutive quarters.

What is the difference between a market correction and a bear market?

Schwab defines the following for correction and bear market:

The general definition of a market correction is a market decline that is more than 10%, but less than 20%. A bear market is usually defined as a decline of 20% or greater.

A death cross (using a 1D chart) takes place when the 50 moving average (MA) line cuts the 200 MA line from above, typically a bearish signal.

<The definitions of the various indices below were taken from the investopedia.com website>

1D chart of S&P500 as of 09May2022 closing

The S&P 500 Index, or Standard & Poor's 500 Index, is a market-capitalization-weighted index of 500 leading publicly traded companies in the U.S. It is not an exact list of the top 500 U.S. companies by market cap because there are other criteria that the index includes.

From the 1D chart of S&P500 above, we note the following:

• A death cross was formed in March 2022
• The stochastic indicator shows a downtrend
• The MACD indicator shows a downtrend
• The 52-week range is between 3,975.48 to 4,818.62
• Based on the 9th May 2022 closing of 3,991.24, this index has dropped 17% from the 52-week high
• This is in a market correction territory

1D chart of Dow Jones Industrial Average as of 09May2022 closing

The Dow Jones Industrial Average (DJIA), also known as the Dow 30, is a stock market index that tracks 30 large, publicly-owned blue-chip companies trading on the New York Stock Exchange (NYSE) and Nasdaq.

From the 1D chart of Dow Jones above, we note the following:

• A death cross was formed in March 2022
• The stochastic indicator shows a downtrend
• The MACD indicator shows a downtrend
• The 52-week range is between 32,121.98 to 36,952.65
• Based on the 9th May 2022 closing of 32,245.70, this index has dropped 12.7% from the 52-week high
• This is in a market correction territory

1D chart of NASDAQ as of 09May2022 closing

The Nasdaq Composite Index is a market capitalization-weighted index of more than 3,700 stocks listed on the Nasdaq stock exchange. As a broad index heavily weighted toward the important technology sector, the Nasdaq Composite Index has become a staple of financial markets reports.

From the 1D chart of NASDAQ above, we note the following:

• A death cross was formed in Feb 2022
• The stochastic indicator shows a downtrend
• The MACD indicator shows a downtrend
• The 52-week range is between 11,574.94 to 16,212.23
• Based on the 9th May 2022 closing of 11,623.25, this index has dropped 28.3% from the 52-week high
• This is in a bear market territory

1D chart of Russell 2000 as of 09May2022 closing

The term Russell 2000 Index refers to a stock market index that measures the performance of the 2,000 smaller companies included in the Russell 3000 Index. The Russell 2000 is managed by FTSE Russell and is widely regarded as a bellwether of the U.S. economy because of its focus on smaller companies that focus on the U.S. market.

From the 1D chart of Russell 2000 above, we note the following:

• A death cross was formed in Jan 2022
• The stochastic indicator shows a downtrend
• The MACD indicator shows a downtrend
• The 52-week range is between 1,754.21 to 2,458.86
• Based on the 9th May 2022 closing of 1,762.08, this index has dropped 28.3% from the 52-week high
• This is in a bear market territory

1D chart of Wilshire 5000 as of 09May2022 closing

The FT Wilshire 5000 Index (FTW5000) is a broad-based market capitalization-weighted index that seeks to capture 100% of the United States investible market.

From the 1D chart of Wilshire 5000 above, we note the following:

• A death cross was formed in Feb 2022
• The stochastic indicator shows a downtrend
• The MACD indicator shows a downtrend
• The 52-week range is between 39,586.54 to 48,868.23
• Based on the 9th May 2022 closing of 39,586.54, this index has dropped 18.9% from the 52-week high
• This is in a market correction territory

How should we invest during a market correction or bear market?

For some of us doing dollar-cost averaging (DCA), we should continue to do so for great companies or indices.

Personally, I am setting aside more money for "cash for crash". While it is foolish to time the market, I rather buy at a higher price as the market recovers than be too early.

"Wait for your pitch" - Warren Buffett

There will also be opportunities where great companies can be made available at good discounts. Remember that we will need to qualify these great companies first. These are also the likely ones which can recover "faster" than their competition. We do not need to buy every company that appears to be on sale.

Wealth transfer starts at the bear market. I do not recommend following prices but rather following indicators. In such times, it will be wiser if we look at longer time frame charts like 1 week or 1 month. Do not be in a hurry as there will be several "false" reversals. During a market crash, we can expect blood on the street.  Warren Buffett once said that it is wise for investors to be “fearful when others are greedy, and greedy when others are fearful.” I think that we will need to put these into actions soon. Do not run away when the market is on sale.

@TigerStars