S&P's weakness in recent weeks has got many thinking that the rally since the March correction is over and that maybe a new round of selling is ahead of us. On such occasions I have found it extremely useful to consult very long-term time-frames (such as the 1M in this instance) and look how similar patterns traded in the past.
As you see on the current study, the current phase we are in resembles the post Black Monday (1987) price action (even though the recovery after the March COVID collapse has been quicker than that of Black Monday's). What preceded the two events is also identical as displayed by the a-b-c-d sequence. After the (d) leg that breached the 1M MA200, a long term bullish cycle started that was interrupted violently by Black Monday. That is very similar to how S&P traded after the 2000 Dot Com crash and subprime collapse (a-b-c-d) leading to a long term bullish cycle that was violently cut by the COVID sell-off. The RSI and LMACD (as we are on the logarithmic scale) also print similar readings.
If history repeats itself, S&P is not ahead of another sell-off but instead has much greater probabilities of being at the very start of a new 10 year Bull Market! Do you agree with that?
Of course it has to be said that there was no pandemic back then nor catastrophic economy lockdowns. But it has to be said that catalysts in Economics may come in different shapes while having the exact same impact/ weight on the market and peoples' psychology. After all it is psychology with fear and greed that is moving the stock markets.
So are you feel we are ahead of a new Bull Cycle or are you selling, expecting a new bearish hit? Feel free to share your work and let me know in the comments section!
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We are at 2x average 1987 PE ratio on SP500, so I doubt we will go for another bullrun that quickly, as valuations are already throught the roof. The only time when it was higher was before the 2000 bubble, and a lot of companies took more than 15 years to recover the value lost in this stock market crisis (not even taking inflation into account)
Bankruptcies are also on the verge.
Presidential elections coming.
I am bearish on my side.
neski
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@Kanlilozord234, The economy has changed, so wealth is flowing into the "new era" companies driving up valuations, at least that's what the market is betting on. Bankruptcies in the "old era" businesses and elections cause temporary fluctuations.
andrande101
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QE don’t care about that shit dude
merkd1904
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When did the first bull market end? I still think we’re late cycle. The COVID crash didn’t violently interrupt anything. In the past 2 years we’ve had a multiple 10% moves and on 20% move down as well as the covid drop. The broadening wedge doesn’t look like a standard consolidation. It looks like volatility.
BertGroffman
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I used to think that everything would crash. Now I understand that hyperinflation, QE, bail outs, etc... hyperinflates public traded asset prices while smaller companies die. Eventually monopolys are created and big banks own everything. It will keep going forever as planned and maybe even faster and higher than expected... The only thing that can stop it is the total dollar collapse but as long as the avg joe still doesnt understand hes being robbed and uses fiat..... it will keep inflating/go up
AMERICANHANDYMAN
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Also known as asset inflation cycle.
Gpap90
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The only way I can believe in this is the fact that nobody believes in it nor expecting it. Harsh reality will hit us hard this winter still bearish AF
CarpeMomentum
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My best guess is that central banks will administer the crisis incidents that will for sure pop up. Like companies failing and likely banks. They will continue to throw money at it and shift the economy to protect the corporations and the rich. So you thesis has some ring to it. Unless a sort of reset is wanted in the economy and the global elite as that inline for us, then we may have the crash to reconstruct the economies globally. It is odd that the vast majority of countries are aligned in their measures against SARS-CoV-2 while it is for sure not the killer virus it is pumped up to be. So we will speculate on the purpose on this strange agreement from politically leaders until we have hindsight. It may just be that they are using the fears to get their agendas and extra money past and to show that they can govern through this to get credibility points.
Bartdeking
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to many people have recency BIAS they look back 1 or 2 years maybe 10 and say.... "see it must go down" we should understand that the the stockmarket does not go up. money continuously devalues hence what it seems like a rising stockmarket.
tradeBob1
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Unless someone does something about the government deficit, we will be having double digit inflation soon. I think you need to factor in 5% inflation for the next 10 years. Then recheck your 10 year bull run thesis. Growth looks zero to negative in the future. Higher prices. Less Demand. Real Estate prices will stay the same or go lower. Dollar same thing. Stock growth will be muted. The Tech PE ratios are absurd currently. There is no valuation based on fundamentals in technology now. It's all speculators and hedge funds. But I'm not saying you are wrong either.
Bankruptcies are also on the verge.
Presidential elections coming.
I am bearish on my side.