The stock market has been in decline in recent days as investors are jittery about the direction of the U.S. economy. After spiking to a six-year high of 4,419 in August of 2018, the Dow Jones Industrial Average (DJIA) has dropped to a low of 3,743 as of December 23rd, 2019. Market indices such as the Standard & Poor’s 500, the NASDAQ Composite Index, and the Russell 2000 have all seen dramatic drops since August of 2018 as well.
At the same time, a bearish triad of stock market indexes—which include the DJIA, the S&P 500, and the NASDAQ—have all tested important support levels in recent weeks. This is a triad of benchmarks that are thought to represent the broader markets, and are considered by investors to be reliable indicators of the overall stock market health.
The NASDAQ Composite Index has broken below the 7,000 mark and the S&P 500 is hovering just above the 2,700 mark. Regarding the DJIA, it is worth noting that the 11,500 level that it was in August of 2018 is now considered significant support.
In addition to these indexes testing important support levels, the CBOE Volatility Index (VIX) is also above the 20 mark, which is considered to be a sign of market anxiety. A VIX reading of 20 or higher indicates that investors are generally concerned about future market movements.
To that end, investors will want to be mindful of these bearish signs that the market is showing. Should one or more of the indexes fail to hold above their respective support levels, investors should take caution and consider re-evaluating their portfolios. Additionally, they should keep a close eye on the VIX. It will likely remain above 20 as long as stock market sentiment remains negative, and investors should be aware of this in order to make more informed decisions.
Ultimately, investors should be aware of the bearish trends in the stock market, and use the bearish triad of indexes and the VIX as tools to determine the best strategies for navigating the markets. With these in mind, they can assess the current health of the markets and make investment decisions with greater confidence.
