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Analysis & Learning

Bear Market : Growth Stocks Fall

April 26, 2022

You won’t need telling that we are in a bear market. The growth stocks that I follow are mostly in free fall. The signs of bottoming out I thought I was seeing have proved illusory. This bear market is still in full flood and could easily get worse before it gets better. For the first time we are hearing talk of recession and this is not a Covid-inspired recession this is a real old fashioned, inflation and interest rates, driven recession. It is like a rerun of Jaws. Just when you thought the beast was dead for ever he comes roaring out of the water.

Markets are oversold so we could see a bounce any time. We often do when I write anything bearish but my indicators are pointing down across the board. My new favourite indicator is the balance of shares in the QV table looking bullish versus those looking bearish. Subscribers will recall that it was this balance which made me turn bearish on 6 December 2021, a stance that was reiterated on 6 January 2022.

I have slightly reformulated my way of making this assessment. I look for shares which I call Unequivocally Bullish v those which are Unequivocally Bearish. Annoyingly the initials are the same for both. In my latest run through, before today’s plunge, there were 37 UBUs (bullish) v 231 UBEs (bearish) and a handful of stocks in neutral. It is very hard to recommend shares to buy in the face of this weakness. If I didn’t have a publishing schedule I would just go away, keep watching my indicators and come back when the good times return.

In this kind of market even the shares that look unequivocally bullish find it hard to make progress and. may just be holdouts that are going to crack in the end. It is like the famous joke about bear markets that when police raid the brothels they take all the girls.

My Coppock indicators are in free fall. There is nothing going up. Almost all the ETFs I follow apart from contra indicators like oil and gold are plummeting. The cyber security security ETFs are hanging in there helping by stunning sector fundamentals but in bear markets even stunning fundamentals may not stop shares from falling.

I listened to a TED talk with Elon Musk. I didn’t realise that he suffers from Aspergers which is a kind of autism. He really is one weird, unusual guy. This may explain his slightly robotic way of speaking. He is obviously clever and he still has incredibly exciting plans for Tesla. His latest one is robots. There are two key issues with autonomous driving – vision and artificial intelligence. Humans can drive cars because. they can see and they have intelligence so we need to replicate that in digital form for cars to drive themselves. But, once we do, if we give it legs instead of wheels we have robots and Musk thinks that business is going to be huge, bigger than cars and maybe coming sooner than you think.

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