S&P 500
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CATCHING THE MARKET LOW: statistics of major falls in the S&P 500 since 1968
Since the Great Depression, the S&P 500 has suffered five major corrections. I downloaded the data, studied the market behavior and identified patterns. Below are the results.
What the story tells
Since the Great Depression, there have been five occasions when the S&P 500 fell more than 30% from its highs. The sixth correction is happening today, against the backdrop of the coronavirus epidemic.
Here are the patterns of past falls:
1. All crises have a strong fundamental cause. The exception is Black Monday 1987. There were no serious preconditions then, and the market collapsed irrationally.
2. Three out of five falls showed a double or triple bottom before recovery. Investors who bought on the first pullback lost money.
3. Before the start of the rally, the market returned to levels close to the minimums. Investors who missed the first or second bottom could have gone 5% higher.
4. A 30% correction is rare. The market falls either less when there are no compelling reasons, or more when there are.
5. It usually takes four times longer for a market to recover than it does to fall. Most falls take between 50 and 80 weeks. Return to maximum – up to 6 years.
What conclusions do we draw?
The main conclusion is that when you catch the market low, it is better not to rush. Typically, waiting has an advantage:
1. The economy will and will be saved. The question is price and time.
2. The market rarely makes V-shaped turns during major crises. It usually shows jagged W-like dynamics.
3. Patient investors get better prices than impatient investors. Even if a patient investor misses the entry point, the market will come back and give a second chance.
4. Waiting for the second bottom to enter a trade is a historically effective strategy.
Of course, it is not a fact that history will repeat itself or that the strategy will remain effective. But if you bet on something, it’s better to bet on repetition, and not vice versa.
What's happening now
Overall, nothing good:
1. The S&P 500 fell 34% from its peak. The catalysts for the fall are the coronavirus and the failed OPEC deal.
2. In terms of the complexity of the economic situation, the crisis is reminiscent of the oil embargo of 1973 or the mortgage crisis of 2008. In terms of speed of development, it surpasses “Black Monday”.
3. The Fed started the printing press. The first market bottom has formed. The rollback has begun.
At the same time, the world economy is still under house arrest, and the threat of defaults, bankruptcies and recession remains. We will see how strong the blow will be in the first and second quarters of 2020.
PS It's too late to sell. It's too early to buy. But this is a good time to visit my website and subscribe to my telegram channel. It's interesting there.
Masterforex-V offers several tactics for trading S&P500 index futures
The main tactics for obtaining profit are based on the axiom that the index grows from crisis to crisis, i.e. The index has been bullish for about 10 years. Thus,
— buy from each rollback to Masterforex-V levels;
- in case of an error - once again open a transaction lower (the main thing is not to become like the adventures of Anti-Martingales and Martingales;
- do not set a stop loss - a bullish long-term trend will pull out all your erroneous trades, of course, if you follow the following rule...;
— full compliance with MasterForex-V money management;
Look at Soros's transactions above - everyone who bought when he sold earned a little more than 10% per annum.
Strategies for making a profit on SP futures (S&P 500 index)
Among Wall Street investors, the most popular indicator is the 200-day simple moving average - anything above it we buy, anything below it we sell. What this can lead to is clearly demonstrated by George Soros, who, in anticipation of the next economic crisis in the US market alone, over several months of 2016. lost about $1 billion:
Fig.5. Deals of D. Soros in anticipation of a new economic crisis
Masterforex-V provides several different trading systems with MF know-how:
— Scalping (Scalping: classics and strategies Masterforex-V) — for trading on time frames m1 and m5;
— Swing trading (Swing trading: classics and know-how Masterforex-V) — for trading on time frames on m30 — n4;
— “3 Elder screens” (three Elder screens: essence, criticism and modifications of Masterforex-V) — for a comprehensive market analysis;
Is it possible to trade the S&P 500 index using automated advisors?
All trading advisors offered on the Internet will not bring you profit. Each of these “robots” is designed to work according to a specific algorithm for a bullish or bearish trend or for a flat. While the impulse or flat continues, the advisor earns money, but when the trend changes, both the profit and the deposit are lost.
For this reason alone, forex or stock market “trading robots” are being sold. Do the math for yourself - if “robots” brought in 200% profit per month, then why didn’t their creators become richer than Deripaska, Abramovich and other billionaires? What will the creator of the advisor answer you to this question - “no time to trade” (?), “I like the development of “robots” (??).
All S&P500 drawdowns of more than 10% for the period 2000-2021 and Russia’s reaction.
#morning_analytics
On the dependence of the Russian stock market on the American market.
There is an opinion that Russia depends on the s&p500 index . Now this point of view is especially relevant, because we all see a bubble in America, associated primarily with the lag of the economy of companies from the growth in the value of their securities. As a result, we all see that exhibitor that alarms any more or less professional market participant.
The credibility of the point of view that the Russian Federation is directly dependent on the United States, and a collapse in the United States will necessarily turn into a collapse in the Russian Federation, is understandable . We are an extremely small market in terms of capital intensity. We have such a thing as a foreign investor who runs at any move, only “his heels are shining,” as Tatyana once said in a chat. However, despite all this, I personally take a different view.
Below I will provide a table in which I analyzed corrections of more than 10% on the SP500 from 2000 to the present and correlated them with what was the reaction of the MICEX index during periods of these drawdowns?
This is what happened.
SPX . Over the period from 2000-2021, there were only 8 drawdowns of more than 10% on the SP500 index. The largest drawdowns were associated with the Dotcom crisis (-48%), the 2008 mortgage crisis (-57%), and the coronavirus crisis (-35%).
MICEX . A very interesting thing was discovered that during the Dotcom crisis, the MICEX index not only did not fall, but even grew by 42.6%. In addition, in two of the existing drawdowns on SPX measuring -15.1%; -12%, MICEX grew by 10% and 4%, respectively. The last more or less significant decrease in SPX by -10.2% was in September 2022. The MICEX index reacted much more modestly – only -2%.
The analysis carried out does not at all mean that there were no other drawdowns on the MICEX index, but in this case I wanted to look and show you the very reaction of our index to any negative movements in the American index. And it turned out that despite the fact that everyone looks at America as a kind of channel for the movement and the Russian market, its reaction is not always in direct dependence, and there are often cases when the dependence was generally inverse.
Given the current state of affairs in the current commodity cycle, I am inclined to think that the current possible “deflation” of the American bubble will not necessarily mean the same drain in the Russian Federation. There is no bubble in our market; it is absent in our market. Again, this analysis does not at all call for abandoning caution regarding the possible reaction of the Russian market to a very gloomy picture in America, but approaching this issue in a stereotyped way is also from the evil one. Therefore, everyone has the right attitude!
Alexander Perfilov, author of the telegram channel “Look at the Market”, my channel is for doing the right things in the market... on time.
