The Case for SPY 200s: A realistic worse case scenario
Updated
Each of the previous major market corrections were as large as they were unique. A 50% correction from all time highs seems a possibility.
Seasonality
Both 2000 and 2007 corrections seemed to have a period of kangaroo markets before a capitulation event. Recovery from there was different, however. The volume was much higher for 2007, which possibly explains why there was no period of attempted recovery like in 2000.
200 month SMA
Another piece to consider is the 200 month moving average. The market can spend significant time below this average. Not enough data to see what happened before 2009. Still, it seems safe to say the market spent time under that average for a few months. A market move of 200-220 would line up with such an action on the chart.
VRP
The VRP Range for the base built from before trade wars starting seems to indicate there are a lot more buyers there than in the recent price ranges.
Future
The light blue line is a possible trend line of future bull markets, depending on where SPY lands. If this bandage got ripped off quickly, we won't see the end until end of 2023, and won't return to the all time high of 479 until the late 2020s or early 2030s. This is also consistent with the previous corrections. If you bought at the top of 2000, you didn't see a profit until 2013.
Does this mean we have to go to that level? No. It is a possible path for the market, not a certainty.
Follow my chart!
Seasonality
Both 2000 and 2007 corrections seemed to have a period of kangaroo markets before a capitulation event. Recovery from there was different, however. The volume was much higher for 2007, which possibly explains why there was no period of attempted recovery like in 2000.
200 month SMA
Another piece to consider is the 200 month moving average. The market can spend significant time below this average. Not enough data to see what happened before 2009. Still, it seems safe to say the market spent time under that average for a few months. A market move of 200-220 would line up with such an action on the chart.
VRP
The VRP Range for the base built from before trade wars starting seems to indicate there are a lot more buyers there than in the recent price ranges.
Future
The light blue line is a possible trend line of future bull markets, depending on where SPY lands. If this bandage got ripped off quickly, we won't see the end until end of 2023, and won't return to the all time high of 479 until the late 2020s or early 2030s. This is also consistent with the previous corrections. If you bought at the top of 2000, you didn't see a profit until 2013.
Does this mean we have to go to that level? No. It is a possible path for the market, not a certainty.
Follow my chart!
Note
Correction through time rather than price could be one way this path doesn't get taken. That is, we get more kangaroo as people get shaken out of the market or take their positions and leave.The retirement of the baby boomers is one substantial difference now than DotCom and GFC. Lots of people at retirement now got their come-to-Jesus moment when the stock market crashed then. None of them want to relive that experience. That capital is gradually getting taken out of the market now as people make their periodic withdrawals. The average year a baby boomer retired was last year.
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