Dips / Pullbacks / Corrections and Bear Markets

Every year, in the S&P 500 over the last 100 years, there are at least 5+ dips (market moves 3% lower), 3+ pullbacks (market moves 5% lower), 1-2 corrections (market moves 10% lower).

Severe corrections only happen once every 2 years and bear markets once every 4 years.

During the same time frame, the market has almost always recovered those losses.

So what’s the takeaway?

Keep a good list of strong stocks that you can buy on every dip or pullback or correction.

I do that work for my subscribers and send them alerts when our favorite stocks hit buying ranges.

So the question is - how do you know which one are we in?

That’s where I think experience helps. There are many heuristics to use including these 7 indicators:

1. S&P Forward Price Earnings Multiple

2. McClennan Oscillator - Advance Decline Line

3. NH-NL indicator - for breadth

4. Market Sentiment - Fear Greed indicator - Bullish, Bearish or Neutral

5. Options chain - Puts / Call indicator

6. Sector Performance for rotation & Market Heat Map

7. Analyst upgrades and downgrade earnings estimate revisions

When 7 of 7 flash yellow or red - be prepared for a correction or more.

Weekly Update

Subscribers were given 3 swing trades and the average gain for the week was 2.2% - in a down week for the markets.