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It doesn’t matter how long you’ve been studying the markets; no one has a crystal ball or a clairvoyant connection that will tell them exactly what is going to happen. And because of this, even experts can be surprised by market movements.
Concrete example, the S&P500 dropped below support earlier this week.
If you are unfamiliar with what we mean by “support”, we refer to the lowest level at which a given security touches but does not fall below. Think of it as the subfloor beneath the layers of rugs, carpeting, and hardwood before you reach the basement.
Breaking support, however, means any given stock 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) has fallen lower than any low we’ve seen since March 2021.
Historically, a drop below support as we saw earlier this week while earnings growth remains positive is extremely rare. But despite strong market fundamentals, it is happening.
However, it is imperative for you don’t panic. Many headlines spell pessimism and intentionally instill terror in vulnerable investors, but as we discussed in Monday’s live stream on our YouTube channel (see a replay here), we do not believe we are in a real bear market yet.
But because he could happen, and trends may indicate that we are approaching a bear market based on this week’s performance, the first thing you should do now is protect your portfolio amidst this volatility.
Now, often when we get to the point of a bear market, there will be automated trading triggers that will occur for buyers of dips where we see stocks rally. During last night’s livewe looked at the interesting mix of stocks that have started to rally…as well as whether the S&P 500 can avoid entering bearish territory.
But come what may, when and if the time is right, we’ll be there to guide you through the choppy waters of a real bear market.
Not out of the woods yet
After a Bureau of Labor Statistics report released on Wednesday, the S&P 500 rallied on news that inflation fell slightly for the first time in seven months.
This is great news, but there are also signs that inflation is not going anywhere for a while. And we certainly feel it in all aspects of our lives; airline tickets, new cars and hotel rooms have increased twice as much in the past two months as in January and February. Rents and mortgage rates are also higher.
The question now, of course, is what does all this mean for your wallet?
We recommend continuing to focus on income generation and not adding additional risk to the portfolio. However, we are waiting for the bullish momentum to pick up and relieve us.
If the bearish buyers re-enter the market in the coming sessions, we should have new opportunities to turn things around. As we reported last week, many stocks that were once overvalued or overpriced have now fallen – albeit temporarily – to more affordable prices, making this a great time to buy stocks.
Fighting market downturns
We understand that at times like these, you might need a little extra reassurance and direction.
Bonus Business Opportunities yesterday’s issue, we brought you a special report from InvestorPlace CEO Brian Hunt, who shared strategies on what to do when the stock market drops, as it has for most of 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 serving their customers have made a fortune.
Click here to read Brian’s special report, “What to do when the stock market goes down.”