Investing Insights

Jon Wolfenbarger's Free Stock and ETF Investor Insights for Profitable InvestingOur most popular feature by far, Investing Insights unleashes the experienced minds of Jon and our team, sharing exclusive information & education we believe smart investors should know BEFORE risking funds in current markets. We share fresh insights at least weekly -- but sometimes more frequently -- as our proprietary economic and technically-driven models & indicators flash bull, bear, turning points, risk flags, wobbles, bubble alerts, accelerating profit opportunities and much, much more. Our members can learn a great deal from this section and it can help both grow AND preserve your nest egg and trading profits. Since you won’t find these insights anywhere else on the web, we encourage you to bookmark this feature and check back often.

BULL VS BEAR  •  January 24, 2022  •  Jon Wolfenbarger

Stock Market Crashing: Bull Market Correction Or Bear Market Beginning?

ESTORIL, PORTUGAL — This month, the stock market is crashing from all-time highs to below key trend lines and moving averages at such a rapid a pace that it resembles the March 2020 crash, as we discussed in our Member Q&A on Saturday.

Most major stock indices and cryptocurrencies have now fallen below their 250-day moving averages (but the S&P 500 rallied to close above it today, as we discuss below), which we view as the key "dividing line" between a bull and bear market trend.

In this Investing Insights article in September, we covered our key bull and bear market technical signals...

"To reduce the risk of “head fakes” and smooth out trends, we generally use the following technical rules to determine when a bull market uptrend is in place:

1.  price is above the 250-dma,

2.  20-dma is above the 250-dma,

3.  60-dma is above the 250-dma and

4.  slope of 250-dma is positive

Conversely, we generally use the following technical rules to determine when a bear market downtrend is in place:

1.  price is below the 250-dma,

2.  20-dma is below the 250-dma,

3.  60-dma is below the 250-dma and

4.  slope of 250-dma is negative"

The chart below of the S&P 500 shows that only the first of those four bear market criteria occurred today, which was the price falling below the 250-dma, but the late day 4% rally enabled the S&P 500 to close back above the 250-dma. Stocks rallied as the market implied number of Fed Fund rate hikes before the end of the year fell below four for the first time since January 14. The next Fed meeting is on Wednesday, so they will likely try to soothe market concerns and short-term traders are getting ahead of that.


Also, with the RSI at 28.55 (below the 30 level that signals prices are "oversold"), the market is the most oversold it has been since the March 2020 crash, which suggests that it will likely have a material bounce soon, which may have started this afternoon.

In short-term crashes like 1987 and 2020, prices bottomed before all four of our bear market criteria appeared. That shows our criteria are very useful in differentiating a short-term crash from a long and grinding bear market. Buying inverse ETFs during short-term crashes is usually a losing proposition, unless one is a very nimble trader using PPO and RSI indicators, as we discussed in our article How To Trade ETFs To Maximize Bear Market Profits.

We are paying very close attention to all of our indicators and are ready to make actionable recommendations once we get a clearer sense of the trend. As this is written, we anticipate a near-term bounce given the oversold situation. A bounce could eventually lead to the resumption of the bull market, or it could provide time for the 20-dma and 60-dma to work their way down to crossing below the 250-dma before the next major leg of a major bear market occurs.

We are always ready to recommend inverse ETFs when they meet all of our technical criteria. And we may start recommending them sooner -- particularly when the oversold situation is gone -- based on the weight of the evidence of all of our indicators.

For example, this chart of SH (inverse S&P 500 ETF) shows it has not yet met our typical buy criteria and, as the flip side of the S&P 500, it is the most overbought it has been since the March 2020 crash, so it will likely have some sort of pullback soon that could provide a better entry point if one were inclined to trade it before all of our typical criteria are met. 


How Is Now Different From The March 2020 Crash?

A key difference between now and the March 2020 crash is inflation was only 2% then and it is 7% now, after the Fed has increased the money supply by 40%. Now the Fed is being forced by the market to slow the money supply — which has already slowed to 7% growth — to try to rein in inflation.

The 2 Year Treasury yield has doubled from where it was two months ago to 1%. The last time it was at 1% was in 2017, when the Fed was following the market by raising the Fed Funds rate to 50-100 basis points (0.5-1%). That suggests at least two to four rate hikes are likely this year.

This is particularly worrisome as the Fed is being forced to tighten as the economy is slowing. Consensus GDP growth is expected to slow from 5.6% in 2021 to 3.5% in 2022. EPS growth for the stock market is expected to slow from 47% in 2021 to 8% in 2022. But it could be worse than that with OECD Leading Indicators showing global economic growth has peaked and US leading indicators are now below their long-term trend. Also, US initial unemployment claims have risen the past two weeks, which is highly correlated with the stock market.

Thus, this could be a much worse and longer lasting bear market than March 2020.

The Key Question

The key question is do we have a major bear market and possibly recession before the Fed even hikes interest rates? That has not happened in modern US history, but it happened many times in Japan in the past 30 years, as we discussed in our Member Q&A on Japan. When short-term rates are held near 0%, as they have been in Japan and are now in the US and many other countries, interest rates can cease providing helpful signals for the economy or stock market.

Usually it takes a year or more for Fed rate cuts to help the stock market or economy, as we saw in the early 2000s and 2008-2009 bear markets, but it happened almost instantaneously in 2020 because investor psychology was so convinced in the power of the Fed to protect them. Now the inevitable resulting inflation is making it virtually impossible for the Fed to bail out investors and maintain any credibility as an inflation fighter with the bond market. Thus, stock investors may react much more quickly to Fed tightening now than they have in the past.

On the positive side, hopefully Covid is ending, since Omicron is relatively mild and many people are getting it regardless of lockdowns, masks, vaccines or even prior infection. Covid is looking more like the flu or common cold that we will have to learn to live with. As life returns to normal, this should help ease supply chain bottlenecks, which should help the economy and lower inflation and not force the Fed to hike as much.

A potential wildcard is the Russia/Ukraine situation. If there is a land war there, and particularly if the US gets involved, oil and gas prices will likely surge, which is “stagflationary”. That could hurt economic growth and raise inflation at the same time, which would really put the Fed in a tough situation.

What Should Investors Do Now?

First of all, don’t panic. This is not the time to not get emotional, but to be as logical and focused on objective facts and indicators as possible. Emotions are the enemy of successful investors. You should avoid getting caught up in crowd psychology.

As we have discussed, stocks can go down a lot and stay down for a long time. It took 25 years for stocks to recover to their 1929 levels. The Nasdaq was down for 14 years after the Tech Bubble burst in 2000. Japan’s stocks market is still 30% lower than it was 32 years ago!

With the stock market valued 40% higher than at the Tech Bubble peak in 2000, stocks are likely to be at least 50% lower than they are now in 10-12 years, as we discussed here. That is why you should be flexible with your investments and learn how to profit in both bull and markets.

The good news is, regardless of what happens, you can take control of your investments away from Wall Street and earn substantial profits in BOTH bull and bear markets. There are always ways to make money investing in stocks and ETFs. As we have discussed, commodities are attractively valued and can provide good returns in times of high inflation, as they did in the 1970s.

And if we do have a bear market, there are ways to make lots of money in a bear market. For example, in the 2008-2009 Great Recession bear market, the S&P 500 fell about 60% in 15 months; but:

  • ETFs for government bonds rose about 25%,
  • gold rose about 25%,
  • “inverse ETF” (which move in the opposite direction of the stock market) such as SH rose 90% and
  • double inverse ETFs like SDS rose about 180%.

All you need to do is to be able to identify when the stock market is in a bull or bear market and invest accordingly, as we discussed here.

The Bull And Bear Profits Commitment

There is no investment approach that can consistently pick the exact top or bottom or that can perfectly trade rapid stock market crashes, so this is a very tricky time for all investors.

The good news is we are not married to a bullish or bearish outlook on any given asset, unlike most investment services.

We are flexible in making recommendations that can benefit from either a bull or bear market trend -- once that trend is objectively identifiable. Thus, we will always be able to find profitable opportunities for investors. 

With our disciplined approach and focus on profiting in both bull and bear markets, we should be able to achieve our goal of significantly outperforming the market and most other investment services over time across complete bull and bear market cycles.

Please don't hesitate to ask us ANY questions regarding our service or about the recommendations, markets, economy, etc. (or to make ANY suggestions to improve the service). Feel free to email or call/text our toll-free number at 1-877-751-2855 anytime.

Thank you for your trust in Bull And Bear Profits. We promise to do all we can to make this the most profitable and informative investment service in the world.

We discuss the 250-dma and many other technical indicators in much more detail in our FREE Special Report entitled "HOW TO USE TECHNICAL ANALYSIS TO INVEST FOR BULL & BEAR PROFITS".

 Previous Issues  

FED WATCH  •  January 18, 2022  •  Jon Wolfenbarger
What Fed Rate Hikes Can Do To Stocks And ETFs In 2022

STOCK MARKET INDICATORS  •  January 8, 2022  •  Jon Wolfenbarger
Rough Start To The Year Is Not Encouraging For Most Stocks And ETFs

LEADING ECONOMIC INDICATORS  •  December 31, 2021  •  Jon Wolfenbarger
2022 Perfect Storm: Global Slowdown + Fed Tightening?

SECTOR TRENDS  •  December 20, 2021  •  Jon Wolfenbarger
Current Best And Worst Stock Sector ETFs For Long-Term Trend And Short-Term Trade

ASSET TRENDS  •  December 13, 2021  •  Jon Wolfenbarger
Current Best and Worst ETFs For Long-Term Trend and Short-Term Trade

BULL AND BEAR TECHNICALS  •  December 5, 2021  •  Jon Wolfenbarger
Holiday Sales Continue On Stocks and “Risk-On” ETFs

BULL AND BEAR TECHNICALS  •  November 27, 2021  •  Jon Wolfenbarger
“Red Friday” Sale On Stocks And Most ETFs

FED WATCH  •  November 19, 2021  •  Jon Wolfenbarger
The Market Says Interest Rate Hikes Are Coming, Whether The Fed Likes It Or Not

COMMODITIES  •  November 11, 2021  •  Jon Wolfenbarger
Commodities Are The Only Major ETF Asset Class With Attractive Long-Term Returns

BULL VS BEAR  •  November 4, 2021  •  Jon Wolfenbarger
Bull Market Continues, But Stocks Will Likely Be 50%+ Lower In 12 Years!

BEATING THE MARKET  •  October 26, 2021  •  Jon Wolfenbarger
Why Mutual Funds Don’t Work

CRYPTOCURRENCIES  •  October 19, 2021  •  Jon Wolfenbarger
Bull Case For Bitcoin ETFs — And The Best One To Buy Now

BULL AND BEAR TECHNICALS  •  October 11, 2021  •  Jon Wolfenbarger
The Stock Market Is Weakening More Than Most Stock And ETF Investors Realize

BEAR MARKET PROFITS  •  September 30, 2021  •  Jon Wolfenbarger
How To Trade ETFs To Maximize Bear Market Profits

BEAR MARKET PROFITS  •  September 22, 2021  •  Jon Wolfenbarger
How To Identify Bear Markets With ETFs And Basic Technical Analysis

ETF STRATEGY  •  September 16, 2021  •  Jon Wolfenbarger
Proof That ETF Strategies Using Technical Analysis Significantly Beat “Buy And Hold” Investing

BULL AND BEAR TECHNICALS  •  September 10, 2021  •  Jon Wolfenbarger
Good News And Bad News For Stocks And Stock ETFs On Three Different Time Frames

BEATING THE MARKET  •  September 1, 2021  •  Jon Wolfenbarger
Three Ways To Beat The Market With Stocks And ETFs

BEAR MARKET RISK  •  August 28, 2021  •  Jon Wolfenbarger
Here’s Why The Next Stock Bear Market Will Likely Be The Worst Since The Great Depression

ETF TRENDS  •  August 26, 2021  •  Jon Wolfenbarger
These Popular ETF “Inflation Hedges” Are Now Moving In Opposite Directions

ETF STRATEGY  •  August 24, 2021  •  Jon Wolfenbarger
What Smart ETF Investors Need To Understand About Bitcoin, Gold and Stocks

SECTOR ETFS  •  August 19, 2021  •  Jon Wolfenbarger
Sector ETFs With The Best and Worst Earnings Growth In 2021 and 2022

ECONOMICS 101  •  August 12, 2021  •  Jon Wolfenbarger
Employment Remains At Recessionary Levels, Thanks To Government Subsidies

MONEY MISCHIEF  •  August 9, 2021  •  Jon Wolfenbarger
Wise ETF And Stock Investors Focus On Money Supply, Not Employment

BULL AND BEAR TECHNICALS  •  August 7, 2021  •  Jon Wolfenbarger
Bonds, Gold and Silver ETFs Are All In Bear Markets

MONEY MISCHIEF  •  July 31, 2021  •  Jon Wolfenbarger
Commodity Stocks and ETFs At Risk As Money Supply and Industrial Production Growth Slows

STOCK MARKET TREND  •  July 24, 2021  •  Jon Wolfenbarger
Stock Market Uptrend Remains Intact, But Four Key Indicators Show Cracks Below The Surface

STOCK MARKET SENTIMENT  •  July 20, 2021  •  Jon Wolfenbarger
Stock Market Investor Sentiment Is Flashing Danger Signs

STOCK MARKET WARNING  •  July 14, 2021  •  Jon Wolfenbarger
Investor Warning: US Stock Market Is Most Overvalued In History!

ASSET TRENDS  •  July 9, 2021  •  Jon Wolfenbarger
What Major Asset (and ETF) SURPRISINGLY Has The Most Bearish Trend Right Now?

INFLATION DANGERS  •  June 30, 2021  •  Jon Wolfenbarger
3 Reasons ETF And Stock Investors Must Prepare To Profit From Rising Inflationary Pressures

DEBT DANGERS  •  June 23, 2021  •  Jon Wolfenbarger
The Government Debt Bomb Could Decimate Stock And ETF Investors Who Are Not Prepared

BULL AND BEAR TECHNICALS  •  June 15, 2021  •  Jon Wolfenbarger
What This Proven Indicator Is Telling Us About The Stock Market And Economic Trend

BOOM AND BUST INDICATORS  •  June 8, 2021  •  Jon Wolfenbarger
What Every ETF And Stock Investor Should Know About Business Cycles

BOOM AND BUST INDICATORS  •  June 1, 2021  •  Jon Wolfenbarger
How To Use The Yield Curve To Profit From Booms And Busts

CREATING WEALTH  •  May 25, 2021  •  Jon Wolfenbarger
How To Achieve Financial Freedom By Investing In ETFs And Stocks

FREE MARKET INSIGHTS  •  May 19, 2021  •  Jon Wolfenbarger
How Successful Stock And ETF Investing Benefits Society By Creating Wealth

CRYPTOCURRENCIES  •  May 13, 2021  •  Jon Wolfenbarger
Trader Alert: 5 Bitcoin Bear Market Sell Signals

BULL AND BEAR TECHNICALS  •  May 6, 2021  •  Jon Wolfenbarger
How To Profit More Than Buy And Hold Investing

BULL AND BEAR TECHNICALS  •  April 30, 2021  •  Jon Wolfenbarger
Why Smart Stock Traders Always Use The 250-Day Moving Average