The S&P 500 averted a bear market Friday, trimming losses to finish flat after trading solidly below a key threshold. But history shows that when a bear arrives, it tends to stick around awhile. The large-cap U.S. benchmark SPX, +0.01% ended the session with a gain of less than a point at 3,901.36 after trading as low as 3,810.32. A close below 3,837.25 would mark a 20% pullback from the S&P 500’s Jan. 3 record finish, meeting the traditional definition of a bear market, according to Dow Jones Market Data. The Dow Jones Industrial Average DJIA, +0.03% erased a 617 point loss to end the day at 31,261.90. A finish below 29,439.72 would put the blue-chip gauge into a bear market.
To be sure, betting that Friday’s price action means a bear market will be averted is to misconstrue the rules of probability. The sample in which past reversals took hold is too small — just three. Moreover, it’s only by the the most nitpicky definition that stocks aren’t in a bear market already. Sentiment has been throttled, earnings are in doubt, and several other big equity benchmarks — among them the Nasdaq 100 and Russell 2000 — have dropped by the requisite percentage. One could also argue that with the equity rout persisting for more than four months, the hit to investor psychology is already done. By now, this retrenchment is longer than three other bear markets. While the definition of a bear market is up for debate, it possesses a weirdly predictive link to the real world. Fourteen times the S&P 500 has completed the requisite 20% plunge in the last 95 years. In just three of those episodes did the American economy not shrink within a year. Among 14 recessions over the span, only three weren’t accompanied by a bear market. “The market is typically way ahead of economic data, so the market is already feeling it — there’s no question about it,” said Scott Bauer, chief executive officer of Prosper Trading Academy. “Something has to pop here.” NN: I placed a big bit Friday that the bottom has not been put in the stock market and a BIG drop is imminent. I could be wrong!! (i hate when that happens). To show you crazy this gamble is. I need a BIG drop and soon for this to work out. In fact i expect panic to come in. The question is will it be the street who panics OR me because i wiped out.