The stock market declined 25% in the first three quarters of 2022

The S&P 500 stock index ended the third quarter down -25% for the year and printed its worst performance through the first nine months of any year since 2002.

Clearly, investing in stock market index funds that are fully exposed to stocks all the time involves risks you must be willing to bear.  

The good news is the stock indices are now oversold as measured by our relative strength indicator, which means we expect a countertrend back up at least temporarily. 

Looking inside the broad stock index that's invested in 11 different sectors, we see the Consumer Cyclical sector is one of the most oversold. 

The percent of stocks in the S&P Consumer Cyclicals above their 50-day average price is zero. When a sector gets so washed out, a countertrend trader starts to look for reversals, then a trend-following trader enters if the price trends up enough.

I shared on Twitter, "The stock market is in oversold territory. We should see a counter-trend reversal."

Mike Shell is the Founder and Chief Investment Officer of Shell Capital Management, LLC, and the portfolio manager of ASYMMETRY® Managed Portfolios. Mike Shell and Shell Capital Management, LLC is a registered investment advisor focused on asymmetric risk-reward and absolute return strategies and provides investment advice and portfolio management only to clients with a signed and executed investment management agreement. The observations shared on this website are for general information only and should not be construed as investment advice to buy or sell any security. This information does not suggest in any way that any graph, chart, or formula offered can solely guide an investor as to which securities to buy or sell, or when to buy or sell them. Securities reflected are not intended to represent any client holdings or recommendations made by the firm. In the event any past specific recommendations are referred to inadvertently, a list of all recommendations made by the company within at least the prior one-year period may be furnished upon request. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities on the list. Any opinions expressed may change as subsequent conditions change. Please do not make any investment decisions based on such information, as it is not advice and is subject to change without notice. Investing involves risk, including the potential loss of principal an investor must be willing to bear. Past performance is no guarantee of future results. All information and data are deemed reliable but are not guaranteed and should be independently verified. The presence of this website on the Internet shall in no direct or indirect way raise an implication that Shell Capital Management, LLC is offering to sell or soliciting to sell advisory services to residents of any state in which the firm is not registered as an investment advisor. The views and opinions expressed are those of the author and do not necessarily reflect the position of Shell Capital Management, LLC. The use of this website is subject to its terms and conditions.