The stock market is currently in the midst of a bearish triad, as major indices have reached essential support levels while market breadth and the VIX index are hovering above 20. Investors should take note of this indicator, as it could signal a potential market downturn and traders should be prepared for a period of uncertainty.
The Dow Jones Industrial Average, S&P 500, and Nasdaq Composite Index are all down over 4% from their all-time highs reached last month. This represents what is known as the bearish triad of the markets, as all three of the major stock market indices are simultaneously flirting with their support levels. Notably, the Dow closed down 0.17%, the S&P 500 dropped 0.10%, and the Nasdaq rose 0.50%.
The market breadth, or the number of stocks advancing against the number of stocks declining, is another important indicator of investor sentiment. The breadth–also known as the Advance/Decline ratio–is currently suppressed at 1.32, indicating that more stocks are down than up. Additionally, the VIX index–a measure of implied volatility in the markets–is currently above 20, a level not seen since the market crash of February and March.
This combined bearish triad can be a sign of a potential market downturn. While no one can predict for sure, investors and traders should keep an eye on this indicator as further volatility is likely to follow. It is recommended that traders limit positions and avoid investing heavily, as the markets may be nearing a critical tipping point.
Overall, the bearish triad of the markets, combined with a decrease in market breadth and a VIX index above 20, may signal the start of a bear market. Traders and investors should continue to monitor these indicators as it is possible that further declines could be seen in the coming weeks. It is important to be prepared for potential volatility, and to limit investments and positions to help protect portfolios from the downside risks of a bear market.
“Beat the Bearish Triad: Test Key Stock Market Levels & VIX Breaks 20!
