It doesn’t matter how long you’ve studied the markets; no one has a crystal ball or clairvoyant connection that will tell them exactly what will happen. And because of that, even experts can be surprised by the market’s moves.
Case in point, the S&P 500 plummeted below support earlier this week.
If you’re not familiar with what we mean by “support,” we refer to the lowest level that any given security touches but does not fall beneath. Think of it as the subfloor beneath the layers of area rug, carpet, and hardwood before you hit the basement.
Breaking support, however, means that any given security has hit a new low — and that’s what the S&P experienced on Monday.
As you can see in the chart below, the S&P (as measured by SPX) tanked lower than any lows we’ve seen since March 2021.
Historically, a drop below support like we saw early this week while earnings growth remains positive is extremely rare. But despite strong market fundamentals, it’s happening.
However, it’s imperative for you not to panic. Many headlines are spelling doom and gloom and intentionally eliciting terror from vulnerable investors, but as we discussed in Monday’s livestream on our YouTube channel (catch a replay here), we do not believe we are in a true bear market yet.
But because it could happen, and trends may indicate that we’re closing in on a bear market based on this week’s performance, the #1 thing you should do right now is safeguard your portfolio in the midst of this volatility.
Now, often times, when we get to the point of a bear market, there will be some automated trading triggers that take place for dip-buyers where we see stocks being coming back up. During last night’s livestream, we took a look at the interesting mix of stocks that started to recover… as well as if the S&P 500 can avoid entering bear market territory.
But no matter what, when and if the time comes, we’ll be here to guide you through the choppy waters of a true bear market.
Not Out of the Woods Yet
After a Bureau of Labor Statistics report released Wednesday, the S&P 500 rallied on the news that inflation ticked a bit lower for the first time in seven months.
This is great news, but there are also signs that inflation isn’t going anywhere for a while. And we certainly feel it in every aspect of our lives; airline tickets, new cars, and hotel rooms increased twice as much in the past two months as they did in January and February. Rent and mortgage rates are higher as well.
The question now, of course, is what does all this mean for your portfolio?
We recommend continuing to focus on income production and not adding any additional risk to the portfolio. However, we are watching for bullish momentum to pick up and give us some relief.
If dip-buyers recommit to the market over the next few sessions, we should get some new opportunities to turn things around. Like we said last week, many stocks that were previously overvalued or too pricey have now sunken — albeit temporarily — to more affordable prices, making it an ideal time to scoop up some shares.
Fighting Market Downturns
We understand that in times like these, you may need a little more reassurance and direction.
In a bonus Trading Opportunities issue yesterday, we brought you a special report from InvestorPlace CEO Brian Hunt, who shared strategies for what to do when the stock market drops just as it has been almost all this year.
During stock market corrections, focus on what really matters: progress, transformational industry trends, creating value for others, and innovation.
[And that] despite all the negative developments of the past 100 years, shareholders of innovative companies that serve their customers have made fortunes.