S&P 500 IndexShort
S&P 500 Long Term Bottoms (& Historical Trends)
Historically there have always been crashes (downtrends) and the S&P 500 SPX has recorded them quite well. This chart takes a look at some of those crashes in the past 20 years and measures their decline and subsequent recovery time in order to better gauge where a bottom (new uptrend) may lie in the current trend. Now, aside from economic recessions or financial crisis most markets are considered healthy when there are sharp price movements. Nevertheless when there are bubbles, the results are crashes and very steep declines which can wipe away ALL gains for (long term) investors.
*Then in 2007, we had the 'housing market crash' or financial crisis which resulted in a 60% drop with a $2 Trillion dollar loss for about 2 years, according to Moody's analytics . It also took 4 years to recover from. Notwithstanding, it was another buy level from 1997 that reversed the trend.
But since then, the economy has been in its Hey day, which includes a couple of small bear markets and pullbacks. The difference in this current crash (Coronavirus-driven 2020 crash) however, is the fact that while other crashes in the past 20 years have taken anywhere 2 to 3 years to culminate or reach major lows, we have thus sustained a decline of 30%, in less than 30 days. And while those other previous crashes have had 3-4 legs (#Dropbasedrop) in its decline, we've seen only 1 or 2. According to S&P Dow Jones Indices, U.S. stocks have so far lost about $4 Trillion of its value and globally, $6 Trillion.
Now the question is where is that bottom? When looking at Trend Analysis markers, we see that in the past, resistance lines (Fibonacci) have not been good indicators for price reversal, as they have historically under-performed as targets. Then more so, traditional indicators actually show that this market is considered overbought (RSI) and that the trend was unsustainable (ATR) and needs to come back to average range. Therefore, a better indicator of possible price reversal is to simply see where price levels actually began (trends). After all, as most traders know, market patterns are synonymous w Trends.
Generally speaking buy levels are different than resistance levels because they have historically been zones of price trends representing alot of buying power. And this is not from the retail side but rather from institutional buying. And as we know when institutions buy (or sell) they move the market. So if we know where a previous level of buying power occurred, we can consider it a good zone for price reversal. Basically it means price at that target was ideal to buy, and most likely buy again.
Although this is not a full strategy, I've identified some 'buy levels' where price and trend will reverse. Nevertheless, we also have to consider other factors. This particular crash has also triggered major drops in worldwide stock markets. Governments around the world have partially shut down and not for economic reasons. This is s global scale crash, one that many economists warned about. The real question is, will the market do what it does, or are all in for a long and arduous financial blackout?
SPX has recorded them quite well. This chart takes a look at some of those crashes in the past 20 years and measures their decline and subsequent recovery time in order to better gauge where a bottom (new uptrend) may lie in the current trend. Now, aside from economic recessions or financial crisis most markets are considered healthy when there are sharp price movements. Nevertheless when there are bubbles, the results are crashes and very steep declines which can wipe away ALL gains for (long term) investors. *Then in 2007, we had the 'housing market crash' or financial crisis which resulted in a 60% drop with a $2 Trillion dollar loss for about 2 years, according to Moody's analytics . It also took 4 years to recover from. Notwithstanding, it was another buy level from 1997 that reversed the trend.
But since then, the economy has been in its Hey day, which includes a couple of small bear markets and pullbacks. The difference in this current crash (Coronavirus-driven 2020 crash) however, is the fact that while other crashes in the past 20 years have taken anywhere 2 to 3 years to culminate or reach major lows, we have thus sustained a decline of 30%, in less than 30 days. And while those other previous crashes have had 3-4 legs (#Dropbasedrop) in its decline, we've seen only 1 or 2. According to S&P Dow Jones Indices, U.S. stocks have so far lost about $4 Trillion of its value and globally, $6 Trillion.
Now the question is where is that bottom? When looking at Trend Analysis markers, we see that in the past, resistance lines (Fibonacci) have not been good indicators for price reversal, as they have historically under-performed as targets. Then more so, traditional indicators actually show that this market is considered overbought (RSI) and that the trend was unsustainable (ATR) and needs to come back to average range. Therefore, a better indicator of possible price reversal is to simply see where price levels actually began (trends). After all, as most traders know, market patterns are synonymous w Trends.
Generally speaking buy levels are different than resistance levels because they have historically been zones of price trends representing alot of buying power. And this is not from the retail side but rather from institutional buying. And as we know when institutions buy (or sell) they move the market. So if we know where a previous level of buying power occurred, we can consider it a good zone for price reversal. Basically it means price at that target was ideal to buy, and most likely buy again.
Although this is not a full strategy, I've identified some 'buy levels' where price and trend will reverse. Nevertheless, we also have to consider other factors. This particular crash has also triggered major drops in worldwide stock markets. Governments around the world have partially shut down and not for economic reasons. This is s global scale crash, one that many economists warned about. The real question is, will the market do what it does, or are all in for a long and arduous financial blackout?
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