S&P 500 IndexShort
It’s all simple math.
Updated
In addition to yesterday’s post (
) here is my medium-term view on the situation.
I wish we were in a bull run… but we are only in a short-term bull inside a much bigger bear market which started in 2018 (yellow trend line I know that trend lines in a descending market must be drawn on the highs, but not possible due to the megaphone pattern) – note also the divergence with RSI which started in 2018.
I am can only deduct we will go to somewhere between 1750 (0.618 retracement) and 2050 (0.5 retracement) at some point or another. We need a major event to break the negative trend.
The 2002 crisis brought us to a 0.618 retracement (from the previous crisis, black Monday 87) while the 2008 crisis brought us to a full retracement from 2002.
In both cases, we bounced back around the 200 months MA (Red line). It was the same with all the previous crisis in the past (you can check if you don’t believe).
I think that these will coincide with RSI going to oversold, probably by the end of the year. Hopefully when our lives would go back to normal and companies having a positive outlook.
Don’t believe that I am happy with what I am saying, because I truly love investing LT based on fundamentals and growing economic trends but… I don’t feel comfortable doing that anymore if it lays on thin air.
Some will say that the situation is not the same and that so much money was put into the system. I cannot more than agree, but it’s also much easier now to take it back, with millions buying and selling stocks from their smartphone and algo’s trading amplifying movements…
In the long term, I have no doubt we can reach 6000 (2.618 retracement if we go down to 1700 – 2.618 is more or less what we reached from the 2008 financial crisis) in 5 to 10 years.
PS: the blue arrow -47% dates back from an analysis I had done on the RSI divergence early February.
I wish we were in a bull run… but we are only in a short-term bull inside a much bigger bear market which started in 2018 (yellow trend line I know that trend lines in a descending market must be drawn on the highs, but not possible due to the megaphone pattern) – note also the divergence with RSI which started in 2018.
I am can only deduct we will go to somewhere between 1750 (0.618 retracement) and 2050 (0.5 retracement) at some point or another. We need a major event to break the negative trend.
The 2002 crisis brought us to a 0.618 retracement (from the previous crisis, black Monday 87) while the 2008 crisis brought us to a full retracement from 2002.
In both cases, we bounced back around the 200 months MA (Red line). It was the same with all the previous crisis in the past (you can check if you don’t believe).
I think that these will coincide with RSI going to oversold, probably by the end of the year. Hopefully when our lives would go back to normal and companies having a positive outlook.
Don’t believe that I am happy with what I am saying, because I truly love investing LT based on fundamentals and growing economic trends but… I don’t feel comfortable doing that anymore if it lays on thin air.
Some will say that the situation is not the same and that so much money was put into the system. I cannot more than agree, but it’s also much easier now to take it back, with millions buying and selling stocks from their smartphone and algo’s trading amplifying movements…
In the long term, I have no doubt we can reach 6000 (2.618 retracement if we go down to 1700 – 2.618 is more or less what we reached from the 2008 financial crisis) in 5 to 10 years.
PS: the blue arrow -47% dates back from an analysis I had done on the RSI divergence early February.
Note
If I can add something - from the macro-economic perspective, it kind of make sense that we loose out 40-50% from the tops as earnings are projected to fall by 40% on aggregate this year, taking 2-3 years to recover after that.It doesn't look like the market is pricing correctly the impact this will have on cash flows... (I did my thesis on merger and acquisition so pricing a company is somehow the basis... and the most robust is often DCF... so cashflow based)
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