The Stealth Bear Market (Technical Analysis)

(13min)

Summary

  • When the short-term moving average crosses below the long term, a “sell signal” occurs. That trigger suggests that investors should reduce equity risk in portfolios.
  • In 2000 and 2008, the moving average crossover signal warned investors that a recessionary onset was coming 9 and 12 months ahead of actual recognition.
  • Understanding that the market tends to lead the economy by six months or more, we can use longer-term market signals to help us navigate the risk of a more significant correction driven by a recessionary downturn.

Price crash and bear market

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Is this a “stealth” bear market? Of course, you may be asking yourself what I mean by that.

Historically, bear markets have tended to be pretty evident, as highlighted in the chart below. These bear markets are often more protracted affairs

This article was written by

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After having been in the investing world for more than 25 years from private banking and investment management to private and venture capital; I have pretty much "been there and done that" at one point or another. I am currently a partner at RIA Advisors in Houston, Texas.

The majority of my time is spent analyzing, researching and writing commentary about investing, investor psychology and macro-views of the markets and the economy. My thoughts are not generally mainstream and are often contrarian in nature but I try an use a common sense approach, clear explanations and my “real world” experience in the process.

I am a managing partner of RIA Pro, a weekly subscriber based-newsletter that is distributed to individual and professional investors nationwide. The newsletter covers economic, political and market topics as they relate to your money and life.

I also write a daily blog which is read by thousands nationwide from individuals to professionals at www.realinvestmentadvice.com.

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