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Is 1929 here again? Coronavirus, the Black Swan is here… Is it a correction or a bear market? #4

March 9, 2020

FINAL BOTTOM

Well, we’re out out the market watching the crash from the safe window and getting bored. Bears are overcoming the bulls. It was a 123,5 ES points breaking gap when futures started trading again this morning, we avoided it, don’t get bored! I know you wish you were short…

Do you remember last Friday’s article and my rolling indicator? With today’s breaking gap we crashed all the records below -16%!

ROLLING 45-1

Nobody can show you where are the stock markets going for sure. But it’s funny to guess it.

I’ve circled with the blue balls the other times the overnight rolling indicator I’ve described here. The above chart collects monthly data from 1993. One blue ball is in the middle of the 2001/2002 bear market. Two balls are at the beginning and at the end of 2008/2009 bear market. And the last one was back in 2011 late summer.

Are we in a bear market or in a correction? Well, technically today we got as far as -20,5% from last all time high. So, yes we are in bear market.

The stock market tested last week the 200 SMA on the daily chart and today it decided to go deeply lower it. So yes we are in a bear market.

The VIX is roaring above 50 and its futures term structure is deeply on backwardation so yes we are in a bear market.

How long shall it last? Nobody knows. From a few days to a several months, maybe more than a year. Let’s see and make some funny (hopefully wrong) forecasts.

Have you seen the blue ball on the right bottom of the chart?

You’re right! There we should go to have something similar to 1929, a 90% drawdown from about 3400 all time high of the ES future.

And remember guys, in 1929 we haven’t computers, internet and algos fighting, there were only people shouting prices for orders… So is it possible to go lower than 2008 big lows? Definitely yes. It is possible. Is it probable? It depends on the crowds.

Have you seen that smooth trendline starting from the 2008 lows?

There’s an old say: every trendline must be broken…

Marco Simioni

Nightly Patterns

P.S. And yes, don’t worry! I’m still alive, healthy and safe here in Italy! 😉

 

 

 

 

 

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