Stocks blasted higher on Wednesday…

Investors and computer algorithms sensed a change in Federal Reserve Chairman Jay Powell’s hawkish stance on interest rates. And everyone scrambled to buy stocks.

That action sent the S&P 500 up 120 points for the day. The index closed at its highest level in two months. It capped a better-than-5% rally for November.

And it has almost everyone asking, “Is the bear market over?”

It’s the same question folks were asking in mid-August – the last time the market blasted sharply higher. The answer to that question back then was, “No.” 

The answer this time is also “No.”

Now before you go and dismiss my comments as just another futile attempt by a perma-bear to justify his pessimistic stance on the stock market, let me point out…

I would love to be able to be bullish here. It’s easier to make money in bull markets than it is in bear markets. So I’m anxious to see the bull charge, and the bear to go back into hibernation.

But that’s not happening – at least not yet.

Take a look at this long-term, monthly chart of the S&P 500…


We looked at this chart one month ago on November 4

Back then, we noted the 9-month exponential moving average (EMA – red line) had closed below the 20-month EMA (blue line).

That sort of “bearish cross” occurred in 2001 and in 2008 (left red arrows). It preceded “waterfall declines” that sent stock prices lower.

We said this bearish cross was a big cause for concern in the months ahead unless the market rallied hard enough in November to pull the 9-month EMA back above the 20-month EMA.

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Despite yesterday’s rally – and despite a 5% gain in November – the 9-month EMA finished November below its 20-month EMA. This confirms the “bearish cross” that occurred at the end of October.

And it increases the chances for a waterfall decline, like what happened in 2001 and 2008.

It’s not a guarantee, of course.

We’re talking about “probability.” And by maintaining the bearish cross on this chart, the probability of a waterfall decline is now higher.

Keep in mind, this is a monthly chart. All that matters is how it looks at the end of each month. So, even if the S&P 500 presses higher early in December, the pattern remains intact until December 31.

Until then… this is still a bear market.

Best regards and good trading,


Jeff Clark

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