How high will stocks go?

It is now clear that the summer bear market rally is over. We are now moving back into bearish territory with a retest of the S&P 500 (SPY) lows at 3,636, a very likely event. But is this the bottom or could we be in store for even more pain? Steve Reitmeister, a 40-year veteran of investing, shares his insight and a trading plan for making gains when the market is likely falling much, much further. Read below for more details.

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In a war, both sides fight over every inch of ground. Everything that was lost in a previous battle, you try to regain in the future.

Often the movement of the stock market is about the same. This is where we often retest and retrieve key price levels. If so, they have now given up the majority of the gains from the surprising 18% rally from the June low, with a retest of that level likely in the near future.

Why is this happening?

The short answer is that it never stopped being a bear market and the 18% rise was nothing more than a 2 month detour from reality. The longer answer, along with the market outlook and trading plan, is shared in the updated comment below.

Market Commentary

The S&P 500 (SPY) crossed the finish line this week as poor economic data coupled with a FedEx earnings warning crippled stocks. It looks like we are now reversing our steps to the June lows...and probably lower.

One of the reasons for this was the shocking FedEx poor earnings report. As a rule, no company will move the market so much. However, in the case of FedEx, it is an excellent indicator of trade health with far-reaching ramifications.

So with a 40% shortfall + the removal of forecasts because the outlook is so bad and immeasurable + the CEO announces a coming global recession = investors are heading for the hills.

Back to the part on the bad economic data this week...

Well, Thursday's list of reports dropped the Atlanta Fed's GDPNow model from +1.3% to just +0.5% for the current quarter. Note that on 9/1, this model indicated GDP growth of +2.6%. It drops very far...very fast, which is definitely not a positive for the sequel, because usually these things are a statement of momentum...and it's accelerating.

The most interesting part of what we learned on Thursday is that retail sales only rose because of inflation...but since growth is below inflation, then net- net shows weak demand. This, combined with more bad import/export news, sent GDP estimates plunging...and stock prices fell again.

As if the fundamentals weren't enough, Thursday's close below 3,908.19 for the S&P 500 (SPY) was tantamount to another sell signal from the famed technicians at TheDowTheory.com. Their bearish calls are pretty much the best in the technical analysis industry.

There isn't much else to report between now and Wednesday as investors await the Fed's rate decision. Will it be 50 or 75 points?

WHO FREAK'IN IS CURE!!!

The nearsightedness of most investment information is criminally insane. Thus, please disregard the price action on that day. The only thing the Fed could say to put the bulls back in control is that the rate hikes are over and the war on inflation has been won.

But that won't happen. Not even close.

That's because the Fed already told us just a few weeks ago from Jackson Hole that it was NOT planned. And that we have a long term fight to fight inflation and that will cause more economic pain.

And yes, more economic hardship means worse than the +0.5% GDP estimate for Q3. This means a probable recession which includes an increase in unemployment. It's not served at the moment, but it will probably be headlining in the coming months. And with it, the bear market should go down.

Now let's talk about the key price areas down for the market/S&P 500 (SPY):

3,855 = 20% decline from all-time highs. That is, the point that separates bullish territory from bearish territory. It came into play today with little support and little bounce at the finish line. Yes, it may provide support a little longer...but will no doubt bend in due course.

3,636 = June lows. You can rarely have...