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Potential? It is a Bear Market!

Only two days ago, I wrote that there is a "potential for a bear market". Potential? Forgetaboutit. This is a bear market.

My analysis really has little to do with Monday's price action which saw the major equity averages down over 6%. While the closes below key pivot points foretold possible trouble ahead, it is those other important charts that I warned about that are spelling "b-e-a-r- m-a-r-k-e-t".

Figure 1 is a weekly chart of S&P Select Financial SPDR Fund (symbol: XLF), which is an ETF representing the all important banking sector. I first warned about XLF on July 19 and then again on August 3. More importantly, a close below 3 key pivot points (those red dots on the price chart in figure 1) is bearish. Period. (And when I mean period, I am talking about a pattern or breakdown that has been tested across multiple assets and market periods.) 13.97 is now resistance.

Figure 1. XLF/ weekly
XLF/ weekly

Figure 2 is a monthly chart of the i-Shares MSCI Emerging Market Index Fund (symbol: EEM). I showed this chart of June 24 and stated: "This is the first real technical warning sign that the market is on the verge of breaking down and the economy is on the verge of a recession. " The cluster of negative divergence bars (pink labeled bars) is a reliable sign of a market top, which is seen across asset classes and time frames.

Figure 2. EEM/ monthly
EEM/ monthly

Figure 3 is a weekly chart of the i-Shares FTSE China 25, which I highlighted on July 18. Here we have a close below 3 key pivot points, and there is little support below.

Figure 3. FXI/weekly

When looking at these 3 charts - banking, emerging markets, and China - it is hard to make the case that we are not in a bear market already.


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