Bear market confirmed
The Dow Jones Industrial Average closed at 41,433 after marginally breaking primary support at 42,000 yesterday. This confirms a bear market in terms of Dow Theory.
Confirmation comes after an earlier bear signal, breaching primary support on the Transportation Average below.
The S&P 500 also signals a primary downtrend after breaching support at 5,800, strengthening the Dow bear signal.
The equal-weighted S&P 500 index ($IQX) was the last shoe to drop, breaking primary support at 7,000 on Tuesday.
Further confirmation comes from the Russell 2000 Small Caps ETF (IWM), in a primary downtrend after breaking support at 214.
The Nasdaq QQQ ETF also broke primary support at 500, warning of a bear market.
Conclusion
We now have confirmation of a bear market from all the major indexes.
Bear markets typically result in a 30 to 50 percent drawdown. With stock valuations at extremes, this one is unlikely to disappoint.
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Author: Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.
Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.
Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.
He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.