The stock market of 2020 has wreaked havoc on millions of investors. And, it has put a big dent in many retirement accounts. Most investors feel and believe that the worst is over, but is it?.
First, please understand that many market "crashes" are quickly followed by bear market rallies (aka "Sucker Rallies"). They are called Sucker Rallies because about 60-65% of the time "the rally" runs out of steam and the market turns down into a 2nd leg of the original "crash" that is even more devastating than the 1st leg down. However, professional investors have determined that in the past, if the rally recovers over 50% of the 1st leg down, in most cases the "crash" has bottomed. That appears to be what has happened now, but maybe not.
In the graph below, you can see that the market (the SP 500) bottomed out after a 34% drop (1st leg down), recovered 50% of this drop about 3 weeks later, spent 24 days trying to break above the 200-Day EMA, and since then has spent the last 5 weeks working its way to "New High" territory. If the SPY makes it to the New High territory, it will be quite a battle there between the Bulls and Bears.
The real question on my mind is "Is the market going to make it to the New High territory or tumble back down somewhere along the way"?.
This time is different (yeah, right) because we are in the middle of a virus pandemic
and the government has approved trillions of dollars in distributions to individuals and US businesses. And, even much more, the Fed has promised "no limits" in loans, buying bonds, and indirectly buying stocks. To date, the Fed has pumped trillions into the economy. This, of course, has been the main catalyst in the up moving markets
(very abnormal). This cannot continue, so what's next?
At this time, we are aware of and reading about multiple brick walls along the way up that could completely reverse this market growth into a very fast acting "free-fall' down". This includes the directions of the virus, ups-and-downs in employment, corporate financial numbers, and what the Fed does next.
Another very surprising example of what the market will soon face is nicely outlined in the following article from CNBC entitled:
"There’s a wave of selling estimated to be in the billions that’s about to hit the stock market" Click on =>
Please read at least part of the above and be conservative with your money (like only investing 50-65% until this blows over).
Good News !!!
On 5/18/2020, we released our new version of all the MIPS models to accommodate:
- "fast acting markets", and
- "high volatility markets"
Our tests show that the new versions perform twice as good as the recent versions that we replaced (more later) !!!
PS - MIPS users do not have to do anything different (just follow signals from the model that you have been following).
Paul Distefano, PhD
Founder / Lead Developer
MIPS Timing Systems, LLC
408-234-8348 (my cell)