Montly analysis of previous bear markets, seeking the bottom.
As we can see, in all the most recent bear markets ( 73, 2000, 2008), the SP500 has dropped by over 50% from ATH, and the downtrend lasted for over a year. In all these events, the monthly RSI reached oversold conditions between 27 and 17. In 73 and 2008, the bear market continued in search of a bottom until it violated the Monthly MA300.
The only event that differs is the crash of 87, but despite the slump, 87 did not materialize into a full-blown bear market.
Given the extent of the economic slowdown, unemployment, public sense of insecurity and overall costs involved in the Coronavirus pandemic, it would seem naive to imagine that the market will behave like 87 instead of 73, 2000 and 2008.
Although it is impossible at this point to estimate the full extent of the economic damage caused by the pandemic, it is reasonable to expect the market to keep making strong waves down with swift corrections up. The most likely target for the bear market is the supportive confluence of the 2000/2008 ATH pivot and the rising monthly 300 MA, but other targets are in the graph.
It is possible that, due to strong global economic stimulus measures, this bear market is briefer than previous ones. We could bottom in the first or second quarter of 2021, which coincides with the time a vaccine is expected to be fully tested, approved and in mass production.
We may also extrapolate long term consequences of exacerbated QE, low-interest rates and overall economic damages as well as the patterns present in this TA to make a case for a 6 to 10-year corrective period with some sort of ATH double top/bottom as the ones seen from 68 to 74 and 2000 to 2009 which could be understood as a decade long flat ABC.
Other than that, some swift 20%+ corrections up are also demonstrated in the TA, just to try and remind those rushing to call the bottom that these waves of hopeful optimism are powerful, but usually brief.
Stay safe.
The only event that differs is the crash of 87, but despite the slump, 87 did not materialize into a full-blown bear market.
Given the extent of the economic slowdown, unemployment, public sense of insecurity and overall costs involved in the Coronavirus pandemic, it would seem naive to imagine that the market will behave like 87 instead of 73, 2000 and 2008.
Although it is impossible at this point to estimate the full extent of the economic damage caused by the pandemic, it is reasonable to expect the market to keep making strong waves down with swift corrections up. The most likely target for the bear market is the supportive confluence of the 2000/2008 ATH pivot and the rising monthly 300 MA, but other targets are in the graph.
It is possible that, due to strong global economic stimulus measures, this bear market is briefer than previous ones. We could bottom in the first or second quarter of 2021, which coincides with the time a vaccine is expected to be fully tested, approved and in mass production.
We may also extrapolate long term consequences of exacerbated QE, low-interest rates and overall economic damages as well as the patterns present in this TA to make a case for a 6 to 10-year corrective period with some sort of ATH double top/bottom as the ones seen from 68 to 74 and 2000 to 2009 which could be understood as a decade long flat ABC.
Other than that, some swift 20%+ corrections up are also demonstrated in the TA, just to try and remind those rushing to call the bottom that these waves of hopeful optimism are powerful, but usually brief.
Stay safe.
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