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Mar 05, 2021

What to Do in a Market Sell-Off

Market declines are a reality of investing. No one can avoid them all, unless you stay in cash all your life (which is still a money-losing strategy, if you consider the impact of inflation).

The throes of a market downturn can be emotionally taxing to investors, but a market corrections should not mean an invitation to panic. Experienced investors know how to mitigate emotional decision-making during market sell-offs with a measured, rational approach that rides-out temporary pullbacks.

First, creating and sticking with an investment plan can help investors weather the storm of a sell-off. When plans are constructed with care – accounting for present and future goals, risk tolerance, and other factors – investors tend to avoid making reactionary decisions with negative ramifications. If you’ve worked with an advisor to select an asset allocation that addresses your long-term objectives and your tolerance for risk, then just remember that your asset allocation also accounts for the natural ups-and-downs of investing. It comes with the territory.

Diversification provides a vital safeguard against negative market behavior. Stocks as an asset class have reliably delivered solid returns over time, but they’re also inherently volatile. Less volatile assets like bonds may not skyrocket in value, but their (generally speaking) low correlation to the stock market and their ability to post steady or slightly positive returns in down equity markets makes them a great way to hedge against losses and, consequently, an important part of any portfolio where risk tolerance is a factor.

Timing is crucial when investing, but that doesn’t mean trying to time the market when it’s in a volatile patch. Picking and choosing when to be active based on downturns can mean missing out on large gains. Data shows that every downturn on the S&P 500 of 15% or more since 1929 has resulted in a recovery – to the tune of a nearly 55% average return in the year following a decline. This means a real chance to profit for those brave enough to endure the down cycles.

While timing can lead to big gains, earnings are typically maximized by a patient, long-term approach. An impending bear market may seem catastrophic in the short term, but investors who can see beyond immediate events and maintain perspective are usually rewarded over time – after all, the S&P 500 had a mean return of 10.43% over 10-year periods from 1937 to 2014.

Even healthy markets have downturns, but corrections and new highs have consistently followed throughout history. Staying rational and focusing on a well-planned investment strategy means viewing sell-offs for what history indicates they are – a frustrating, but temporary, market behavior portending better things to come.

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Related Ticker: SPY

SPY in -0.46% downward trend, sliding for three consecutive days on March 26, 2024

Moving lower for three straight days is viewed as a bearish sign. Keep an eye on this stock for future declines. Considering data from situations where SPY declined for three days, in of 246 cases, the price declined further within the following month. The odds of a continued downward trend are .

Price Prediction Chart

Technical Analysis (Indicators)

Bearish Trend Analysis

The 10-day RSI Indicator for SPY moved out of overbought territory on March 22, 2024. This could be a bearish sign for the stock. Traders may want to consider selling the stock or buying put options. Tickeron's A.I.dvisor looked at 47 similar instances where the indicator moved out of overbought territory. In of the 47 cases, the stock moved lower in the following days. This puts the odds of a move lower at .

The Stochastic Oscillator demonstrated that the ticker has stayed in the overbought zone for 7 days. The longer the ticker stays in the overbought zone, the sooner a price pull-back is expected.

SPY broke above its upper Bollinger Band on March 20, 2024. This could be a sign that the stock is set to drop as the stock moves back below the upper band and toward the middle band. You may want to consider selling the stock or exploring put options.

Bullish Trend Analysis

The Momentum Indicator moved above the 0 level on March 18, 2024. You may want to consider a long position or call options on SPY as a result. In of 64 past instances where the momentum indicator moved above 0, the stock continued to climb. The odds of a continued upward trend are .

The Moving Average Convergence Divergence (MACD) for SPY just turned positive on March 27, 2024. Looking at past instances where SPY's MACD turned positive, the stock continued to rise in of 50 cases over the following month. The odds of a continued upward trend are .

Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where SPY advanced for three days, in of 361 cases, the price rose further within the following month. The odds of a continued upward trend are .

The Aroon Indicator entered an Uptrend today. In of 446 cases where SPY Aroon's Indicator entered an Uptrend, the price rose further within the following month. The odds of a continued Uptrend are .

Fundamental Analysis (Ratings)

Fear & Greed

Notable companies

The most notable companies in this group are Microsoft Corp (NASDAQ:MSFT), Apple (NASDAQ:AAPL), NVIDIA Corp (NASDAQ:NVDA), Alphabet (NASDAQ:GOOG), Alphabet (NASDAQ:GOOGL), Amazon.com (NASDAQ:AMZN), Meta Platforms (NASDAQ:META), Eli Lilly & Co (NYSE:LLY), Broadcom (NASDAQ:AVGO), JPMorgan Chase & Co (NYSE:JPM).

Industry description

The investment seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the S&P 500® Index. The Trust seeks to achieve its investment objective by holding a portfolio of the common stocks that are included in the index (the “Portfolio”), with the weight of each stock in the Portfolio substantially corresponding to the weight of such stock in the index.

Market Cap

The average market capitalization across the SPDR® S&P 500 ETF Trust ETF is 116.96B. The market cap for tickers in the group ranges from 5.96B to 3.13T. MSFT holds the highest valuation in this group at 3.13T. The lowest valued company is VFC at 5.96B.

High and low price notable news

The average weekly price growth across all stocks in the SPDR® S&P 500 ETF Trust ETF was 0%. For the same ETF, the average monthly price growth was 4%, and the average quarterly price growth was 23%. AES experienced the highest price growth at 14%, while LULU experienced the biggest fall at -18%.

Volume

The average weekly volume growth across all stocks in the SPDR® S&P 500 ETF Trust ETF was -9%. For the same stocks of the ETF, the average monthly volume growth was 3% and the average quarterly volume growth was -9%

Fundamental Analysis Ratings

The average fundamental analysis ratings, where 1 is best and 100 is worst, are as follows

Valuation Rating: 61
P/E Growth Rating: 51
Price Growth Rating: 34
SMR Rating: 51
Profit Risk Rating: 44
Seasonality Score: 24 (-100 ... +100)
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