According to Bank of America Merrill Lynch, 14 of 19 bear market signals have already been triggered. The United States equity market keeps sliding. S&P 500 has lost 3% of its value over the course of only 24 hours, and 9% when a three-week period is considered. Bank of America Merrill Lynch goes as far as to warn its clients of prolonged decline, that could last until 2021.
Bullish investors may find it difficult to secure gains in the upcoming month. The bull market, that began back in March 2009, is by far the longest in American history. Yet, as we know, each and every bull market will sooner or later turn into the bearish one. The question is when.
The trade war between the United States and China and higher borrowing costs are stated as the most probable reasons.
“If US companies can’t blow away the numbers when domestic GDP is growing at +3%, when exactly will they?” says Nicholas Colas, co-founder of DataTrek Research.
Yet, things are not as bad as it may seem. The market is currently sending contradictory signals. It is true that 74% of Bank of America’s bear market “sign posts” have been triggered. However, it is also true that the market is not yet overheated to the point of an imminent correction and the market still has some room to grow. Four of the past seven bull markets peaked with 100% of the indicators being triggered. According to the analysts, it will take S&P 500 21 more months to peak.
Maybe the next financial crisis is not around the corner just yet but, judging by the Bank of America’s milestones, we are definitely getting closer to it day by day.
A bearish market is not necessarily a bad thing, especially for a speculator who knows how to trade market ups and downs. Trading opportunities that arise during the downfall are numerous and should not be ignored.Trade now
NOTE: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future.
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