Don't Let Bear Market Rallies Burn You

Folks, the market is in a very precarious situation right now... The S&P 500 Index, our broad measure for stocks, is frothy with volatility. And the market has endured a series of rallies and crashes since the beginning of this year. [Chaikin PowerFeed]( Don't Let Bear Market Rallies Burn You By Marc Chaikin, founder, Chaikin Analytics Folks, the market is in a very precarious situation right now... The S&P 500 Index, our broad measure for stocks, is frothy with volatility. And the market has endured a series of rallies and crashes since the beginning of this year. Don't let this back-and-forth environment bait you into taking unusual risk. I've learned an important lesson during my 40-plus-year career in the financial industry... Investors can lose more money turning prematurely bullish in a bear market than in the steep, early declines. We discussed [the fears of a financial "hurricane"]( about a month ago. As I said at the time... The day of reckoning is getting closer. In short, a three-fold dynamic is driving stock prices lower... 1. Rampant inflation higher than 8%, year over year 2. Impending interest-rate hikes and a deleveraging of the Federal Reserve's balance sheet 3. A collapse in price-to-earnings (P/E) ratios – particularly for megacap and speculative growth stocks that led the bull market to all-time highs The P/E ratio for the S&P 500 has dropped nearly 50% from its peak. But that doesn't mean the market is "fairly priced" today... Growth can still experience a slowdown. In fact, that's playing out right now as businesses hunker down for a recession... Layoffs are rampant. And non-core projects are being canceled. As I've said before... In past Fed rate-hike cycles that were fast like this one, P/E ratios didn't bottom until well into a bear market. That's when analysts started cutting their earnings estimates. So plain and simple... The short-covering rallies in stocks in recent months are typical of bear markets. Now, the other shoe is about to drop. And you need to pay attention to one thing in particular... Recommended Links: [Get Dr. David Eifrig's Latest Market Call]( On Tuesday, July 19, Dr. David Eifrig is stepping forward with the biggest announcement of his career. It all centers around a wave of money flooding Wall Street, even as stocks crash. He says this misunderstood corner of the market could ravage the wealth of those who aren't prepared. [This critical update is 100% free – click here for details](. [A Massive Wave of Bankruptcies Is Coming]( It's actually much bigger and more important than what happens to the Nasdaq or S&P 500. Yet some of the world's best investors are practically drooling in anticipation. Because this crash will create a slew of 100%-plus opportunities... backed by legal protections that stocks can only dream of. A top analyst tracking the story believes this could happen within months – and you must prepare now. [Get the full story here right away](# Chaikin PowerFeed). The biggest unknown – and biggest risk – for the stock market is second-quarter earnings reports and management's guidance for the rest of 2022. We'll need to watch these reports closely. They'll help us see how companies' management teams are dealing with rampant inflation and an impending economic recession. Widespread layoffs and hiring freezes like the ones announced by software giant Oracle (ORCL) are noteworthy. Combined with sharply higher interest rates and a shrinking of the money supply from the Fed, continued fears could generate a broad liquidation of stocks. So it's no surprise that the past month has seen typical, volatile bear market price action... The markets have experienced a series of sharp declines followed by swift retracement rallies. However, in the end, the S&P 500 is still showing a bearish pattern of lower highs and lower lows. It's clear on the chart. Take a look... [Chaikin PowerFeed] Lower lows and lower highs are a classic bear market pattern. Investors need to take this pattern seriously. It's the one thing we need to pay attention to right now. Don't let little bear market rallies suck you in. You're not going to "call the bottom" doing that. You'll just wind up with a lot of frustration – and likely more losses. If the S&P 500 were to close above 3,950 or 4,000, it would be constructive from a short-term perspective. Still, that might be difficult to achieve given the flood of economic and earnings data coming out this week. So for now, be patient. Keep watching for the washout buying opportunity I expect to happen later this year. From what I'm seeing, it could happen around September or October in the range between 3,400 and 3,600. That means the S&P 500 could drop another 5% to 10% from here. Until then, stay vigilant. And don't let a bear market rally burn you. Good investing, Marc Chaikin Market View Major Indexes and Notable Sectors # Hld: Bullish Neutral Bearish Dow 30 -0.72% 2 22 6 S&P 500 -0.52% 30 338 131 Nasdaq -0.21% 9 54 36 Small Caps -0.09% 215 1126 472 Bonds +1.15% — According to the Chaikin Power Bar, Small Cap stocks and Large Cap stocks remain Bearish. Major indexes are all bearish. * * * * Top Movers Gainers [rating] TWTR +7.90% [rating] MOS +3.21% [rating] CTRA +3.04% [rating] CLX +2.58% [rating] DPZ +2.52% Losers [rating] FAST -6.44% [rating] ODFL -5.13% [rating] DAL -4.47% [rating] GWW -4.18% [rating] ILMN -3.62% * * * * Earnings Report Reporting Today Rating Before Open After Close CAG CTAS, MS FRC, JPM No earnings reporting today. Earnings Surprises [rating] DAL Delta Air Lines, Inc. Q2 $1.44 Missed by $-0.28 [rating] FAST Fastenal Company Q2 $0.50 Beat by $0.01 * * * * Sector Tracker Sector movement over the last 5 days Energy +0.41% Discretionary -0.01% Staples -0.44% Utilities -0.70% Information Technology -0.93% Financial -1.10% Materials -1.14% Industrials -1.48% Real Estate -1.55% Health Care -1.77% Communication -2.48% * * * * Industry Focus Telecom Services 4 22 19 Over the past 6 months, the Telecom subsector (XTL) has underperformed the S&P 500 by -1.29%. Its Power Bar ratio, which measures future potential, is Very Weak, with more Bearish than Bullish stocks. It is currently ranked #7 of 21 subsectors and has moved up 4 slots over the past week. Indicative Stocks [rating] VSAT Viasat, Inc. [rating] INFN Infinera Corporation [rating] UI Ubiquiti Inc. * * * * You have received this e-mail as part of your subscription to PowerFeed. If you no longer want to receive e-mails from PowerFeed, [click here](. You’re receiving this e-mail at {EMAIL}. For questions about your account or to speak with customer service, call [+1 (877) 697-6783 (U.S.)](tel:18776976783), 9 a.m. - 5 p.m. Eastern time or e-mail info@chaikinanalytics.com. Please note: The law prohibits us from giving personalized investment advice. © 2022 Chaikin Analytics, LLC. All rights reserved. Any reproduction, copying, or redistribution, in whole or in part, is prohibited without written permission from Chaikin Analytics, LLC. 201 King Of Prussia Rd., Suite 650, Radnor, PA 19087. [www.chaikinanalytics.com.]( Any brokers mentioned constitute a partial list of available brokers and is for your information only. Chaikin Analytics, LLC, does not recommend or endorse any brokers, dealers, or investment advisors. Chaikin Analytics forbids its writers from having a financial interest in any security they recommend to our subscribers. All employees of Chaikin Analytics, LLC (and affiliated companies) must wait 24 hours after an investment recommendation is published online – or 72 hours after a direct mail publication is sent – before acting on that recommendation. This work is based on SEC filings, current events, interviews, corporate press releases, and what we've learned as financial journalists. It may contain errors, and you shouldn't make any investment decision based solely on what you read here. It's your money and your responsibility.