Looking back at all the bear markets in the US, the average drawdown is around ~33%, or roughly a third of the gains from the most recent cycle/run up.
If we're to assume that the current bear market may be around that average, then we're looking at the 3450-ish level which we are approaching quite fast and furiously.
There's also moving average support here so it may come to where we find support here a while, get some traction and start to grind higher and avoid a recession.
If you're thinking and feeling like this is more along the lines of the financial crisis and the dot com bubble, or even the great depression, where we gave back around 50% and higher of gains, then we're looking at 2100 leve on the SPX. This would represent 50% drawdown of the gains we had since the bottom of the financial crisis to the highs of 21-22.
What do i think?
Well, i think the 3400-3500 level will be an area where the market will try to take a stand against the bears and perhaps move and consolidate sideways for a bit while it figures out the many factors that are moving the markets today. Perhaps the Fed will build and stablize the confidence of the markets to ease inflation and avoid a hard(-er) landing; perhaps the pandemic and the global supply chain issues will ease, and the geopolitical threats in Ukraine and a potential one in China-Taiwan will subside or never be realized, and a global recession will be a small one. If so i think then there's a chance that the markets will move higher from this support level and test some resistence levels it's sliced through and gain back the confidence of the markets to move higher.
On the other hand, none of these things improve but worsen, and even worse yet, couple of exogenous events are added to the mix to panic the markets and send us below and toward that 50% mark. Perhaps there's a bank failure in China, or Bitcoin craps out completely. Perhaps China DOES make a move on Taiwan, or the pandemic takes a turn for the worse with a new variant, or politics in the US takes a violent turn for the country and even though the Fed is raising rates, inflation continues to grow and gets out of hand in to double digits. Who knows.
The we have to think that not only will we be testing the 2100 level, but perhaps the highs of 2000 and 2008, even. Then we're looking at a full blown DEPRESSION, not a full blown recession. How far that rabbit hole goes... nobody knows...
Good luck everyone.
If we're to assume that the current bear market may be around that average, then we're looking at the 3450-ish level which we are approaching quite fast and furiously.
There's also moving average support here so it may come to where we find support here a while, get some traction and start to grind higher and avoid a recession.
If you're thinking and feeling like this is more along the lines of the financial crisis and the dot com bubble, or even the great depression, where we gave back around 50% and higher of gains, then we're looking at 2100 leve on the SPX. This would represent 50% drawdown of the gains we had since the bottom of the financial crisis to the highs of 21-22.
What do i think?
Well, i think the 3400-3500 level will be an area where the market will try to take a stand against the bears and perhaps move and consolidate sideways for a bit while it figures out the many factors that are moving the markets today. Perhaps the Fed will build and stablize the confidence of the markets to ease inflation and avoid a hard(-er) landing; perhaps the pandemic and the global supply chain issues will ease, and the geopolitical threats in Ukraine and a potential one in China-Taiwan will subside or never be realized, and a global recession will be a small one. If so i think then there's a chance that the markets will move higher from this support level and test some resistence levels it's sliced through and gain back the confidence of the markets to move higher.
On the other hand, none of these things improve but worsen, and even worse yet, couple of exogenous events are added to the mix to panic the markets and send us below and toward that 50% mark. Perhaps there's a bank failure in China, or Bitcoin craps out completely. Perhaps China DOES make a move on Taiwan, or the pandemic takes a turn for the worse with a new variant, or politics in the US takes a violent turn for the country and even though the Fed is raising rates, inflation continues to grow and gets out of hand in to double digits. Who knows.
The we have to think that not only will we be testing the 2100 level, but perhaps the highs of 2000 and 2008, even. Then we're looking at a full blown DEPRESSION, not a full blown recession. How far that rabbit hole goes... nobody knows...
Good luck everyone.