A bull market shows its age


The stock rally that started way back in March of 2009 is looking a little winded.

Worries about a trade war with China and a selloff in mega-cap tech stocks are weighing on the market heading into the second quarter.

The Standard & Poor’s 500 Index and Dow Jones Industrial Average are down 3.4% and 4.3%, respectively, as of April 2.

 

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Red Flag

Then there’s this red flag: The S&P 500 Index has fallen below its 200-day moving average, for the first time since June 2016.

Technical analysts and chart watchers believe that’s a major negative turning point.

The development may also signal future declines, perhaps as much as 5%, according to Adam Turnquist, Piper Jaffray’s technical analyst who spoke to Bloomberg.

 

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Source: Bespoke Investment Group

 

If so, that would push the S&P 500 to around 14 percent below its January record.

 

Tech Troubles

Even more troubling has been the selloff in tech stocks that have played an outsized role supporting the rally.

The stocks of both Apple (AAPL) and Google parent Alphabet (GOOGL) have hovered around their 200-day moving averages.

Also under pressure is Facebook (FB), which is facing heat over its lax data security and concerns about its commitment to the privacy of its users.

Amazon (AMZN), meanwhile, has drawn the wrath of President Trump, who claims the internet giant doesn’t pay enough in state retail taxes or for delivery of its packages by the US Postal Service.

 

 

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Bond Yields

Tumbling bond yields may also reflect a shift out of stocks into fixed income assets in my view.

Yields have slumped in recent trading sessions.

 

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Source: Bespoke Investment Group

 

 

Takeaway

The current bull market is one of the most enduring in financial history.

However, if the S&P 500 Index falls 20% from its last high in January, it may all come to a crashing halt. And if that happens, we would be officially in a bear market.

That’s far from certain to be sure. Yet there’s no question, in my opinion, the rally looks wobbly heading into April.

Photo Credit: Sam Valadi via Flickr Creative Commons

 

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Xavier Brenner
Xavier Brenner
Xavier Brenner has covered global market, business and economic trends for Interactive Brokers Asset Management since 2013. An experienced financial journalist, Brenner offers analysis and insights on the stories that matter to the discerning investor.