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The harsh reality under the shiny hood of the indecies
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Loading...One of the obvious bearish markets right now is the one with stocks that have had an IPO soon.
Usually, the definition of a bear market is when we have a drop from the last peaks within 20% or more. However, the true definition leaves a vague, regularly changing definition by the media, but it is so largely determined by society whether a market is doing well or badly.
Like most things on the markets, this elemental approach does not always work. If we are to follow the definition of a 20 percent decline, then we really have no bearish market except for 2008-2009, when the Great Recession came. The reality is that for the last 10 years, almost all market sectors have fallen into the bear market. Even leading stocks like Apple and Facebook have experienced bear markets several times in recent years.
Currently, we are seeing more manifestation of this type below the surface of the indices. This is mostly observed in stocks with a recent IPO. Peloton's underperformance has re-emerged, leading to the cancellation of an upcoming big IPO. These things usually happen in a bear market that is easily recognizable.
IPOs are not considered a market segment because a wide range of industries are involved. But there are mostly high-growth stocks in the segment with almost no or little reports, which are generally not good at all. Uber, Pinterest, Slack Technologies and more are in their own, small bear market and are completely detached from indexes that are a few percent off their ATH.
Other market sectors are also suffering. Software and Cloud stocks are also taking a hit as cash flows move into more valuable stocks. Biotechnology is also suffering, and oil stocks can't find a direction, despite the defeat in Saudi Arabia. Micron has recently announced weak prospects, which puts the semiconductor group at risk of not starting and spilling cash from it.
One of the worst losses is with small caps. Russell 2000 performs poorly after peaking in September 2018.
Most big names in the media ignore what's going on. What misleads them are the hostages of the US or China news about the trade war. Sellers cannot attack indexes because there is this risk of news. Instead, they set up individual stocks or sectors.
It's much safer to go for expensive IPOs than trying to bet against the S & P500, which will blow up any meaningless news about China.
Indices that are sensitive to news about the trade war and the central banks simply cover what's happening below their surface - very poor performance and mass sales.
To navigate this market successfully, you need to focus on individual stocks. They can destroy your account as you watch the indexes barely move. Do not neglect your discipline. Use stop and go management no matter what the indexes do.
Note that the end of the third quarter is approaching. This means that the Funds will undertake ever stronger rotation maneuvers. This move also creates new opportunities that we can take advantage of.
Trader Martin Nikolov Read more:
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