Magnificent Seven Approach Bear Market as Doom and Gloom Intensifies

NYSE traders

The market has been struggling for more than five weeks now, and the doom, gloom and despair intensified on Friday. There was no TACO talk to create hope, President Trump extended the deadline on Iran by 10 days, Israel indicated its operations there could continue for another four weeks and there is no indication that a deal is even possible.

The sour mood and relentless negative news flow sent oil prices higher and bonds lower. There was steady selling all day as the major indices hit new recent lows and now have what I call "dangling in the wind" chart patterns with no visible support underneath.

Magnificent Seven Approach Bear Market Territory

The Magnificent Seven is on the brink of a technical bear market, down around 19.6%. Betting it crosses the 20% threshold is probably a safe assumption. I'm not going to expound further on the degree of the ugliness. Most of us are already far too familiar with it.

Despair Is a Necessary Step

Now, here is the good news. The corrective action is advancing and becoming extreme. We can certainly go lower, but we are now at the point where despair has taken hold. Most market bottoms don't form in dramatic fashion. They are built with a whimper, not a bang. I have written often that bad markets don't scare you out, they wear you out. We are seeing some of that now, and that means we are getting closer to support.

Stand Aside and Wait

The action from Friday is exactly why I have been saying to ignore the folks trying to call a bottom. That isn't smart strategy. It is ego, hope and recklessness. The way to approach this market is to stand aside and wait for conditions to improve before you act. Don't buy into the teeth of a decline this ugly.

Patience Creates Opportunity

This terrible action should make you optimistic about the opportunities that lie ahead. Stay patient and avoid the pundits who pretend they have some special ability to predict the future.

Have a great weekend. I'll see you on Monday.

At the time of publication, DePorre had no positions in any securities mentioned.