seeking alpha have a summary of the 28 bear markets since 1928.
“There have been 28 bear markets since 1928. The average decline was 35.62%, and the average length of time was 289 days”
So, as long as this market doesn’t beat records (maybe it will), we should get a recovery somewhere in the blue area below. Unfortunately it’s quite a big ‘window’... but if we get an average decline for average duration, it would be somewhere around q3 / q4 this year.
I suspect it will be much longer this time, especially for UK small caps . My guess it will be 3 years plus with the odd dead cat bounce in between .
You beat me to the punch Breakout i was just thinking of starting such a thread out of interest in the graph/chart what market is it being measured against dow , s&p 500 ?
Thanks Andy
This is coincidental as earlier today I was looking at some index ETFs and going over the times they have dropped and time to recover, it’s good to remind yourself that volatility is just part and parcel of investing.
Between 7-10 months is the norm although I do wonder if this time is different (as is said every time) so could be longer.
There just appears to be a number of causes driving the markets and it’s unlikely they will all be resolved in tandem with each other.
Fun to look over this stuff and see what has gone before,
I cannot see a recovery any time soon - with the exception of the usual small rallies.
Inflation rates in the UK are now forecast to hit 11% in Oct-Dec as the next round of utility price rises hit.
Many companies are still doing OK at the moment..............but this will change as interest rates start to bite and those companies with high levels of debt, limited revenues and poor fundamentals will begin to struggle.
The heat will then come out of the economy and at that point unemployment climbs as cuts are needed to keep companies above water. Which in turn will drive down further spending in the economy and lead to further falls.
I think it is only at the mid-way through this cycle that the markets will see a way out and start to come back - how long that will be, who knows, but I personally think we are only in the opening skirmishes at the moment of a much longer war. My expectation is that things won't be much better in 9+ months and potentially it may take 18+ months before things turn around.
I hope I am wrong and nobody knows for sure. There are also many unknowns that could have an influence eg. The Ukrainian war coming to some kind of resolution, or somehow we muddle through the inflation rises without a major meltdown and once rates begin to drop there is a remarkable rebound..............???
Personally I am keeping my small cash pot on the sidelines and am trying not to look at low SP's as bargains - I feel most of them have some way to go down yet. I am also regretting not moving to a much higher cash holding many months ago - I've been on a downward trend for 12 months already which is hard work.
There will still be a few winners so if you can find these it will help, but trying to identify them isn't easy.
Good luck to everyone.
Maybe it will end soon. Maybe it won't. Maybe it will get worse. Maybe it won't. I agree that it does feel as if it will get worse before it gets better. But then it always does feel like that when things are bad.
'Many companies are still doing OK at the moment..............but this
will change as interest rates start to bite and those companies with
high levels of debt, limited revenues and poor fundamentals will begin
to struggle.'
Yes indeed. The corrollary is that companies with high levels of cash, growing revenues and strong fundamentals will do well.
I remain 100% invested. I have been rotating out of indebted companies with poor fundamentals since this began. Unfortunately not fast enough in a couple of cases which has seriously hurt my funds. And into companies with good prospects, net cash and strong fundamentals.
In the meantime the market has reduced multiples across the board so I am not immune from share price falls - I do expect the falls to be softened by companies reporting progress and to be in a good position to benefit when the market turns. I have no idea when that will be - so much of that is not just driven by external events but by sentiment. Just when it seems it will never end is generally when it does.
cheers all
Mark
When will it end? Who knows? As said no one rings a bell when markets hit the bottom. In simple terms I would suggest two fairly obvious catalysts:
An end or at least a ceasefire in the dreadful and senseless war caused by Russia's invasion of Ukraine.
An inflexion point in inflation; signs that it has peaked and is starting to come off.
I accept the fact that the market is forward looking but the sell off in UK small and mid cap stocks has been indiscriminate I would suggest. Companies that are clearly trading well and have a cash rich balance sheets have not been spared. An example being EKF Diagnostics Holdings (LON:EKF) where recent announcements have been positive lost nearly 10% yesterday. I have a reasonable position but resisted the urge to add given the pervading gloomy sentiment.
I remain close to fully invested as when the market turns it is likely to do so in a dramatic fashion. I wish everyone well.
Been getting the tea leaves out again, but bear with me.
Noticed a couple of interesting things if you add a fib retracement from the COVID lows to the bull market peak.
Firstly, the recent rally occurred perfectly on the 38.2% fib retracement level, which also coincided with the bear market threshold of a 20% overall decline.
The next significant fib level is 50%, which coincides almost exactly with a significant resistance level from the bull run, at around 3500 (round number) - it would not surprise me at all if this is where we see the next market rally kick in, which may last 2-3 weeks.
Finally, in dark blue I’ve added the “golden” retracement zone between 61.8% and 78.4%, this to narrow down the area where the bear market may come to an end. Note that the worst bear market ended at 61.8%, although that is against the whole market history, not the most recent significant low.
Don’t take this too seriously, it’s pure speculation, but I do think some of these levels could come into play as this bear market proceeds.
Thought I'd update this post, showing where we now are (on the S&P 500) in comparison to previous Bear Markets since 1928.
We're now almost at the Average Duration, and perhaps more significantly in the short term, close to the 50% Fib retracement level at 3501.
We had a brief rally off the 38.2% level, and it wouldn't surprise me if we see a decent bounce off 3501. That could happen within the next week - lookout for the US inflation figures on Thursday which could provide a catalyst.
It does feel like this bear has further to go - Hope everybody is hanging in there and keeping losses to a minimum. The current is against us but it will turn eventually. All the best.
Hi Breakout Trader,
Nice chart. FWIW, I covered my half my shorts today and tightened stops on remainder, also took a speculative long position late in the session with tight stops as weekly candles show potential for a reversal imo, currently sitting right on the 200 EMA.
On the monthly TF price is currently retesting the upper boundary of the QE ascending channel following a massive breakout. Bullish invalidation level at around 3582.
3625 is also the 1.618 fib extension of the initial downtrend... so we are definitely at an interesting technical juncture.
Whilst I still consider that further downside is the greater probability, who knows what happens from here as the institutional algorithms are now firmly in control of these markets imo.
Should we continue downwards back into the channel, bearish targets are at 3235, 3029 & 2433 (downside breakout).
Great chart, thanks! I'm expecting this to last until at least next summer, which would get towards the long end of the historical range. I think the price level is much harder to predict, although my current guess is that we will see a '2' handle on the S&P at some point.
There's the bounce off the 50% fib level as suggested - tea leaves sometimes work ;)
Potential to become a multi-day / multi-week rally, but sentiment around the US CPI data seems negative.
Absolutely BT,
I first posted the chart below in ‘The Scores and the Doors’ thread on 05 Jan after calling the top and going short....
Here's what it looks like now with a scalded cat bounce off the 618 retrace from pandemic low to ATH's !
Looks like the robots just closed out some long term shorts.... The question is, did they reverse or not?
If the USD strength starts to cool off, and the dollar index may just have made a lower high…. it might be time for Gold and other commodities to shine with inflation persisting….
