Cyclical Review of the SPX v2

SP:SPX   S&P 500 Index
The years denoted on the chart are the centre of each yellow circle. In each circle is the central violation of the 200 month moving average, amongst a cluster of three. You'll see the 200 month MA serves as support either side of the one circled. This is a bit of a loose use of the term support but what I mean is big recessions like this seem to result in three touches or violations of this MA. I've made a bit of a guess of the one in the 1870s but it seems a fairly clear pattern in the 1930s, 1970s and one may be emerging right now, with the first violation in 2009 according to one way of interpreting it:

Version 1

Going by the pattern, we'll have two more 200 MA intersections then we're good to go in another multi decade bull market. I don't know when, but Barron's has said 2020 will be the start of the recession. Going by the chart, to get back to the 200 month MA we will need to at least go down to 1650 on the index. This is about a 50% retraction.

Version 2

Another way to interpret it is we've had our three touches in 2009, '10 and '11. They are very close together though. In the 1930s recession, the first touch/support was in '21, the last in '42, a 21 year stretch before the next bull market. The one in '75 was much shorter, first support '74, second '78. A four year stretch. So perhaps governments have gotten more skilled at managing recessions and it's realistic to expect this one to be done and dusted in three years.

Related Ideas