The Dow Jones Industrial Average closed at 41,433 after marginally breaking primary support at 42,000 yesterday. This confirms a bear market in terms of Dow Theory.
Confirmation comes after an earlier bear signal, breaching primary support on the Transportation Average below.
The S&P 500 also signals a primary downtrend after breaching support at 5,800, strengthening the Dow bear signal.
The equal-weighted S&P 500 index ($IQX) was the last shoe to drop, breaking primary support at 7,000 on Tuesday.
Further confirmation comes from the Russell 2000 Small Caps ETF (IWM), in a primary downtrend after breaking support at 214.
The Nasdaq QQQ ETF also broke primary support at 500, warning of a bear market.
Conclusion
We now have confirmation of a bear market from all the major indexes.
Bear markets typically result in a 30 to 50 percent drawdown. With stock valuations at extremes, this one is unlikely to disappoint.
Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He founded PVT Capital (AFSL number 546090), which provides income and growth strategies to wholesale clients.
Colin also co-founded Incredible Charts and writes the popular Patient Investor newsletter.
Using a top-down approach, Colin identifies macro trends in the global economy and then combines fundamental and technical analysis to evaluate opportunities in sectors that stand to benefit.
Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.