Beware the ‘Stealth Bear’ Shaking Things Up in Stocks

Off the Charts: The Visual Says It All

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Beware the “stealth bear” that’s contributing to increased volatility in the stock market so far this year, analysts warn.

Even though major stock indexes haven’t fallen yet into official “bear” territory—that’s defined as a drop from their peaks of at least 20% for a sustained period—some analysts are pointing out a weakness lurking below the surface that may be causing some of the market fluctuations. That weakness is what Schwab analysts call the “stealth bear” market, which occurs when many individual stocks within a stock index fall by 20% or more. And by the looks of it, the stealth bear in the tech-laden Nasdaq index isn’t quite as quiet anymore. The chart below shows the robust percentage of individual stocks in the Nasdaq that are in bear territory already.

“There have only been a few times when more than 40% of stocks were down 50% or more,” said Jason Goepfert, chief research officer at SentimenTrader, which is published by Sundial Capital Research, in an email. “It happened quite a bit during 2001-02, during the worst of the panic in 2008, and again for a few weeks in March-April 2020 during the pandemic panic. That suggests that under the surface, an extreme number of stocks have been absolutely hammered, perhaps meaning that the bulk of selling is already behind us.”

But there’s a caveat, he added: During the post-bubble period after the 2000 peak, this level of selling didn't mean the bear market was over. So nothing is a sure thing, and for now, Goepfert said he’s staying away from exposure to broad technology stocks. 

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  1. Charles Schwab. "Schwab Market Perspective: Slipping Gears." Accessed Feb. 15, 2022.

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