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Has the Bear Market Resumed?: Market Commentary from Cabana’s CEO – September 28, 2023 

1 year ago

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The stock and bond markets continue to take it on the chin as bond yields climb higher and higher. It doesn’t help that we have a lot of domestic and international disfunction going on at the same time. So, has the bear market resumed and all these gains by big tech that have pushed indices up been a huge head fake? I of course don’t know with certainty, but I will go back to what I said in early August. I said then that stocks were overdue for a pullback, which could be expected to drop the S&P 500 down to 430 (SPY) and if that support didn’t hold, then a test of 420 was likely. I said that while painful, it would not change my belief that we would remain in a bull market even down to those levels. I said we would need to see a close (weekly is better than daily) below 410 for the “new bull market” to be questioned. We are still above that line in the sand now and the market cap weighted Nasdaq and S&P 500 are still above their all-important 200-day moving averages. The Dow Jones is right on it. The small cap (IWM) and equal weight S&P 500 (RSP) has broken it, which is not good, but they could quickly reverse if the former indices can hold. Both stocks and bonds are oversold in the short term and probably due for a bounce, perhaps before we get the real test later in October. 

 All in all, we are still in a technical bull market in my view – albeit one with wobbly legs. Interest rates will likely determine rallies in stocks going forward. A pullback in yields should provide the impetus for stocks to bounce. The question is whether yields will continue down or start rising again. It is the rising again that may flip this market from a weakened bull to a bear. 

At Cabana, we are currently in our Bearish Scene. We are in Safety Valve allocations taking advantage of the current short duration treasury yields in our Target Drawdown strategies (and have been since mid-August). Our new Target Beta strategies are also in our Bearish Scene but optimized to their respective targets. 

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January 17, 2024

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The Nasdaq Composite Index is a market-weight capitalization index that covers more than 3,000 stocks listed on the Nasdaq Stock Market. What is the Nasdaq Composite, and What Companies are in It? | Nasdaq