S&P500 Monthly Chart - 2020 Correction Still Not Over...

2020년 3월 21일

Using a monthly chart of the S&P 500 I am simply charting two interesting characteristics based solely on longer-term technical analysis and charting:

1) what percentage was the drop in 2008 SPX levels and what was the corresponding percentage drop in the stochastic RSI level (to see at what level was it oversold) vs what percentages we have dropped for the same parameters currently in March 2020.

2) at what moving average level did we hit a bottom in 2008 and what could this imply for 2020: I am using a moving averages of 90, 200 and 365 for the monthly chart.



2008:

1) % Drop: the S&P500 dropped approximately by 53% and the RSI reading fell by 98%.

2) We also hit a bottom at the monthly moving average of 365 back then.



2020:

1) I was curious to see what a 53% drop from the all-time highs in 2020 would look like and how much more room there was in terms of both price level and the RSI to drop: both indicate that to get to a similar level correction in terms of % drop, we have quite some more room to go down near the 1600s in the SPX.

2) Also If 2008 is any guidance then the ultimate bottom could be the 365 day moving average for 2020 which would be a catastrophic drop from the 2020 all-time highs.



Final thoughts:

In my opinion, we are witnessing a historic economic AND financial de-leveraging. We have never ever had a global sudden economic stop. So while comparisons to 2008 aren't entirely accurate, it the 2008 global financial crisis serves as some point of reference. Without the need to spew further doom and gloom, it is abundantly clear that this sudden coordinated global halt in business and services is nothing short of spectacular and we may very well evolve from the current recession to a depression. While the speed of global central banks to enact policy and local governments fiscal policy stimulus have been tremendous in size and speed, this new environment we are in seems to be way more than just a virus. It seems more and more that there was a global desire for a debt/economic reset and this virus pandemic serves as the perfect environment to start the process.

So even though tactically we could see a small rally, it would likely be short-lived and would be the ultimate bull-trap as the strategic longer-term direction is still bearish both from my technical view point and the economic/financial deleveraging context.



***the above analysis is my opinion only and should not be taken as trading advice. You alone are solely responsible for all and any of your trading decisions. All of your decisions should be be analyzed, researched and validated and must be be based on your own judgement."