Most Stocks Have Hit a Bear Market, but They Can Fall Lower
The Nasdaq 100 has fallen more than 10% and is in a technical correction.
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The market was hit with steady selling for most of the day on Monday. When the dust had cleared, the S&P500 had fallen about 2.8%, the Russell 2000 was down 2.6%, and the Nasdaq 100 QQQ was down 3.9% and in a technical correction. The Magnificent Seven MAGS was trounced with a loss of 5.2%
The market is littered with destroyed charts. More than 70% of stocks are under their 200-day simple moving average. A large number of stocks are already deep into bear market territory, although the S&P 500 still has to drop another 12% or so to reach bear market levels.
There is a large amount of data to illustrate the extent of the carnage, but the primary issue we need to grapple with is whether we are getting close to a tradable low.
The problem is that the market is dealing with uncertainty about the economy and tariffs. Because there is little clarity about what may happen, it isn’t possible for stocks to discount the negatives. You can’t price in bad news if you have no idea what the ramifications of that news might be.
The market was long overdue for some correction in stocks that have become grossly overvalued. That process started with the Magnificent Seven last year, but it is still taking place. Stocks like Apple AAPL are still trading with a PE over 30 and have only single-digit growth. They may have dropped quite a bit, but they were still not cheap. Tesla TSLA had its worst day since September 2020, but it still has a PE of 109 and estimated EPS growth of 18% in 2025, which is dropping fast.
The good news is that there are many stocks that are becoming good values, but no one wants to touch them yet because the downside momentum is so strong. Just because they are cheap doesn’t mean they can’t go lower.
The best advice I can give for dealing with this market is to not try to play the game of timing the exact bottom. Have a shopping list of stocks that you like, but only buy them when they start to exhibit strength. The goal is to try to buy them when they start to uptrend. If you focus on trying to time the exact bottom, you are going to be too early, and the risk of downsides is still high.
The mood is extreme enough to set up some bounce action, but don’t trust it to be a V-shaped bottom.
Have a good evening. I’ll see you tomorrow.
At the time of publication, DePorre had no positions in any securities mentioned.
