Recession In the UK we came to the end of the financial year and at this point the end to the first quarter for the global economy. Governments around the world will now declare that GDP our economic production has decreased, and unemployment has increased. We’ve seen all major central banks update fiscal and monetary policy, the Fed has announced a 6.2 trillion stimulus package. S&P 500 has seen the most significant downturn in history. What can we expect over the next coming months?
The main catalyst for this recession is global debt, housing debt, energy industry debt, household consumer debt, and corporation debt. This is the everything bubble. It has been further fueled by COVID-19, The pandemic has caused Global quarantines and lockdowns. Consumers are being told to stay at home for a period of 2 to 3 weeks at which point the infection will be reviewed and the quarantine assessed. Consumers and not driving the vehicles this is reducing demand for oil and gas. Consumers spending habits have reduced significantly emphasizing a decline in economic activity. Non-essential Businesses have been closed indefinitely this has had a knock-on effect on people’s jobs and employment. Many are waiting for government funding packages to provide financial support during self-isolation and unemployment. We can see an extortionate amount of government spending with no max parameters in place. Over the next few months we will have to see how cases increase and how companies will be affected we will need to see how cold it is treated and how effective the quarantining is. These quarantines are not a one off I have been implemented to slow the spread of the infection and once they have lifted and the infection reemerges, they will be forced again to Quarantine. Businesses and executives know that this will occur and so will be hesitant to open or continue their business operations, they will be on likely to begin recruitment and re-employment because of this. This has a significant knock-on affect the economic activity. Governments suppressing the spread of infection in order to curve the peak demand on to healthcare services. Health officials are waiting for a vaccine to be developed or for herd immunity, both of these can take many years. All of these factors contribute towards fear uncertainty and doubt in the general public. This is setting up to be a depression, the great depression 2.0
What does this mean for SNP 500 index? For me look at the 2001.com bubble price fell 50% in the bear market. In the 2008 housing crisis the price sale 58%. If we continue this pattern into our current circumstances from our all-time high of around US$3400, we are likely to fall50% again placing the S&P 500 index at 1700, this is the decline of over 1700 points. If we use the all-time highs from 2001 and 2008, We can conclude a resistance for our current downturn of around US$1500. We need support, we can see support at US$1800 in 2014 and 2016 Low’s. And this gives us are likely target price range for this current recession, however if we breach and full-blown resistance of US$1500 I’m confident that we will reach loads of US$800 this sort of drop and contraction in the overall economy will be defined as a depression and it will have significant adverse effects on the globe.
Each and every financial crisis governments have attempted to stimulate the economy and we see a short-term correction from the stimulation. By the long time it doesn’t help realistically the sessions depressions and the business cycles will continue to occur because the global economy is built on continuous quanitivie easing and liquidity injections.
I hate to be so pessimistic. However, there is optimism for we investors Have the greatest opportunity to enter the markets of multiple industries exceptionally low prices and we will likely see corrections up to all-time high of 2019 US$3,400. Realistically this timeframe is likely to be up to 7 to 12 years until we even get close to that price again. Could we be in the midst of the financial systems collapse?!
it's gonna be so fast, you might miss it... check my feed!
H_Woodrow
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@chocotraders I know I’ll blink and pop! I like your stuff, I’m pleased to see that you follow Jesse Columbo as wel!
LotusTrading20
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@H_Woodrow, yes, i followed him on twitter recenlty.
as for the pattern is just a "potential"... the way to trade it is actually wait for it to develop and long at the bottom...
that said, i'll keep adding shorts and evaluate as it develops... for the pattern can for now only be "assumed" (another way to say "guessed").
that said the symmetry in the moves is stagering and targeting 1000 in one go does sound crazy to me too...
Gamblers_Paradise
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I agree with most of what you are calling here. I hate to be even more pessimistic, but I see an even further drop for us down to the 750-960 price point.
I have produced a Monte Carlo Simulation as to what a full Bubble Pop Market Cycle would look like for a portfolio with 1M USD and is only invested into the US StockMarket at its peak and the turmoil it would experience (open in new tab if it doesn't auto populate img) and it even calculates a possible -96% drop of the portfolio value.
Took the calculations on maximum downturn and other specifics to the charts;
Specifically I used the Dow Jones Industrial Average because it has the run-up double top and bubble + pop included from the Great Depression. Reason i wanted those there was to draw out the trend lines to see where possibly bottom territories are for a Full Market Cycle Bubble Pop. Coincidentally the price action, the calculations from the simulation, the trend channels and scaled statistics including taking into account the accelerated movement due to HFT Bots; everything converges around the area that would be the confluence of Support and Resistance of 1962-1982.
Monthly Timeframe:
A Few things I will point out on the lower timeframes, is that on every index about 2% from the all time high, there is a 1.8% gap that needs to be filled.
DJIA Gaps: $28,400-$28,950 (high) // $21,475-$21,700 (low) $19,150-$19,620 (low)
SPX500 Gaps: $3,263-$3,322 (high) // $2,538-$2,570 (low) $2,300-$2,345 (low)
Which is grounds for the price going almost all the way to the all time high. I don't see it surpassing the all time high because on every index we have also formed 1 if not 2 gaps at our lows we just saw that have yet to be filled. With that knowledge, the price is looking to fill the gap up top, to return back down to the lows we just saw to fill those gaps as well. What you have just created is a Descending Triangle with a Macro Double Top. This alone topping the extremely inflated market as it is, is a dagger through the heart. But throw in some more bad news from the COVID-19 pandemic and you have yourself one long trip on a highway to hell.
Sure there is some support, but how many times that support has actually be tested as support and how many times as resistance? How difficult was it to overcome that resistance? The first viable for of support with more than 2 macro touches would be the confluence of support at the mid point of the double top from 2000-2009. Then we are looking at trying to overtake a part of the market that was quantitatively eased upward. Being that our debt and inflation has gotten much worse over the past 10 years, I dont see it moving upward like people think.
The next viable support line is all the way down below the 1987 crash which is the The Grind of 1962-1982, sideways movement for 20 years. That is my target for bottom and would complete a Market Cycle Bubble Pop crash and capitulation as well.