I Woke Up Bearish

I had a positive outlook on the markets for 2023 as of the end of the previous year, but recent developments have significantly increased my concerns, to the point where I have adopted a bearish stance. In particular, the events that transpired yesterday have made me even more bearish.

I've been closely monitoring the S&P 500 chart, and it has been hovering near the 200-Day Moving Average for the past week. This is a significant indicator of the market's overall trend, with trading above indicating a bull market and below signifying a bear market. Notably, substantial declines often occur when price falls below the 200-Day Moving Average.

Unfortunately, the S&P 500 is currently trading below the 200-Day Moving Average (see chart below.) Furthermore, the uptrend seems to be broken, as the price failed to rebound off the moving average and instead dipped below it. This indicates a lack of strength in the market.

For most of this year, the market was primarily driven by the success of the prominent tech companies and the compelling narrative surrounding artificial intelligence. Consequently, it's crucial for the "Magnificent 7" to maintain their strong performance and continue leading the way.

However, this situation changed yesterday. The "Magnificent 7" collectively suffered a loss of nearly $300 billion in market capitalization in a single day. It's worth noting that the burden was not evenly distributed, with Alphabet accounting for more than half of this loss due to disappointing Google Cloud revenue results in the third quarter. Then again, it wasn't that bad and investors were just finding an excuse to sell.