Is the Bear Market here and how long will he stay?
The definition of a Bear market is when stocks are down 20% or more from the previous highs. On October 3rd, the Dow peaked at 26,838. Since then it has dropped as low as 24,443. This is only a drop of 2,395 points (~9%). On August 31st, the NASDAQ peaked at 8,109.5 and since then has dropped as low as 7,050.3; which is a drop of 1,059.3 points (~13%). On September 21st, the S&P peaked at 2,929.7 and since then has dropped as low as 2,641.3; which is a drop of 288.4 points (~10%).
The numbers above for the NASDAQ and S&P indicate “correction” territory, not a Bear Market. For the Dow, we haven’t even seen a correction yet (unless you count the 11.6% decline from January to March earlier this year). No, the Bear Market has not yet taken hold. The questions you should be asking yourself now are: will it, and if so, then for how long?
My belief is that, for multiple reasons, a Bear Market condition is close at hand. One significant reason, is that the current Bull Market has been going on since March 2009. We are close to a 10-year anniversary of that date, and only once in the history of the stock market has a Bull Market gone on for longer than the current one.
The second significant reason is the business cycle. The last recession, called The Great Recession due to its length and severity, lasted from 2007 to 2009. The business cycle rarely goes longer than 10 years between recessions, so we are overdue for a recession, and recessions are bad for the stock market. And when multiple cycles are bottoming out at the same time, they usually have an amplifying effect. This is a very bad omen, and bad timing for anyone invested in the stock market.
The Bear is taking a dip, and soon the stock market will be under water too…