Lessons learnt in market crash

S&P 500 Stocks DAILY Above 50-Day Average BEFORE FALL

Price is the true north star and her sisters are a few – one particular one is how many stocks in S&P 500 are above their 50 days SMA ($S5FI)

The first big red candle and a drop of 10 percentage points in the number of stocks above their 50 days SMA happened 12 days  before the actual market crash!

Market lost its floor on October 10th and you see in the above chart that the big red candle appeared on 9/24.

Do you see the gradual descent in the above chart! It falls below all the Moving Averages (MA)..the green 10 Days Exponential MA and also the 22 days SMA and 55 days SMA.

It falls below 50 % on 10/04.

there are other signs that go along with this. More in the coming days posts.

now a drop of more than 10 points in $S5FI occurred  in 4 days by 02/01/2018 and NASDAQ dropped to the low 765 points in the next 6 days!

Similarly $S5FI dropped more than 10 points on 02/27/2018 and NASDAQ dropped to the low of 246 point in the next 3 days.

similarly in 4 days by 03/15/2018 it dropped by more than 10 points and then in next 11 days the NASDAQ dropped by 676 points!

and it dropped by more than 10 points in 4 days by 6/19/2018 and in the next few days NASDAQ dropped 362 points

and it falls by more than 10 points on 9/24/2018 and NASDAQ drops 1000 points in the next 18 days!

I am staying in cash

 

 

 

Historic Drawdowns in market

The last two weeks steep downhill and loss of 10+ percent on S&P

RED DOTS – inter year DRAWDOWNS

The chart below shows calendar year S&P 500 returns without dividends (grey vertical bars).  Below the bars are red numbers which indicate the maximum intra-year drawdowns.  The chart makes clear that 10% drawdowns are fairly common.  What is not common is a drawdown of only 3% which was the case in 2017.

Another important observation from the above chart is that as long as the economy is not in a recession (areas shown with horizontal green bars), the calendar year returns are usually positive.  The U.S. is not currently in a recession.

From January 1950 through December 2017, the S&P 500 has declined by 5-10% 41 times.  The average length of the decline was one month.  The average recovery from the low was one month.  In the 11 cases that the S&P 500 declined by 10-20%, the sell-off lasted and average of 4 months and recovery took and average of 3 months.

Source : delta maker sentiment