Despite the market seeming to keep reaching all time highs, bearish sentiments are beginning to form as we gear up for a new year. The S&P 500 is trading 26% higher compared to the previous year, despite the average gain being around the 10% mark over the last 20 years.
However, the number of companies in the index fund entering long-term bear market trends is increasing. Compared to a figure of 85 a couple of months ago, more than 120 companies are now under this trend. What this means is potentially a more significant stock market correction may be seen.
This trend was determined by analysing the 20-month moving average of stocks in the S&P500: a technical method of determining whether we are in a bull or bear market. This trend is even beginning to affect well known companies such as Adobe, Nike and Johnson & Johnson. This negative momentum calls for concern as we head into a new year.
As investors begin questioning the high valuations laid upon the industry leaders of the Semiconductor industry such as TSMC and Intel, selling pressure is likely to increase. This is exacerbared by fact that the stocks are trading below their 50-day moving averages.
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