To The Moon

Today’s Focus

• The possible short-term, mid-term and long-term trend of $S&P 500(.SPX)$
• Three ways to ruduce downside risk exposure in bear market？

As of Thursday, $s&p 500 (.Spx) $fell 6% this week.After the S & P 500 opened gap down100 points on Thursday, it opened gap down again on this Monday, forming a weekly gap around 60 points between 3,900 and 3,838. Historically, such a gap market often takes 3 to 6 months to fill up.

Statistically, on Thursday trading,100% of $Nasdaq 100 Trust(QQQ)$ stocks were down，98% of $SPDR S&P 500 ETF Trust(SPY)$ stocks were declined, 98% of $ProShares UltraPro Short Russell2000(SRTY)$ stocks also decreased.

The latest sectors performances as followed.

Source：QuantScraper

More than 90% of stocks in the S&P 500 declined on thursday. It's the 5th time in the past 7 days.  Since 1928, there have been exactly 0 precedents.

This is the most overwhelming display of selling in history.

Generally, the volatility on the delivery day is huge. Espeacially when market has been constantly breaking history.

However, the volatility of the U.S. stock market index $cboe volatility index (VIX) $was at 32.95 on Thursday, which has not yet broken through the high level in the past half a year (needs above 38). Generally, VIX will callback when it fluctuates to the relevant point.

Perhaps this shows that market investors have expectations for the current US stock correction, and believe that the correction has not been in place, and the anxiety $Cboe Volatility Index(VIX)$ has not reached a level exceeding the recent half year.

S&P 500 declined 24.5% from its high on Jan 4, which the largest decline since Feb-Mar 2020 and longest since 2015-16.

The U.S. stocks didn't fell enough yet? 

Where the Bottom would it be? 

Will the market trend to as bearish as 2008 under the rate hike & reccession?

For $S&P 500(.SPX)$ 's comming trend, we can turn to 3 circustans : Day change , mid-term support, and longterm trend forcast.

Ofcouse, all the below perspectives are only for my personal think ,not trading advices directly. 

1. Watch Out Friday's Quadruple Witching Day Moves

Friday is also the Quadruple Witching Day, the maturity settlement date of derivative financial products. 

Watch for a heavy burst of activity toward , as $3.4 trillion worth of options expire, according to Goldman, an unusually high figure. That includes $1.9 trillion worth of options tied to the $S&P 500(.SPX)$ in particular.

In short-term, The 3,500 points area may be is a major support for index.

2. Trust Pre-Covid Support Level ?

For a larger glance of the trend. From the current position, seems need to go down another 7.5% from here it takes us back to the Pre-Covid highs(3,377 point) as well as trendline going back to 2012.

 We can expected Whether this would be a nice place for the markets to find support.？

3. Historical Bearish Duration References

Currently $S&P 500(.SPX)$ is down 7% below its 17-day EMA(Exponential Moving Average). There have literally only been a handful of times we've reached these lows in past 15 years. 

2 of these times happeded in 2020 and 2008, all the times the market went much lower. how long does 2008 and 2020 bearish lasts?  

we can see the chart under below. From the chart of COMPOUND, bearish duration in 2008 and 2020are 243days and 11days respectively. The average duration of a bear market is 154 days since 1957.

The current $S&P 500(.SPX)$ bear market began on January 4th, and roughly 150 days in duration. 

Seems next week, we will find the answer that the current round bearish may surpass average bearish period, And once the bearish duration exceeds 180 days, it is expected that the duration will be longer to 200 or 300 days.

And longer statistics show that, On average, a typical bear market takes 388.8 calendar days, or about one year and three weeks to reach the bottom，calculated 11 bear markets (a decline of 20% or more) since the beginning of 1950.

How can investors survived in bear market？

Here are three strategies  that may reduce downside risk exposure and improve long-term return potential.

1）Use the average cost method. The average cost method refers to buying stocks at a fixed time interval without considering the price, or buying stocks at a specific price point without considering the market trend. For investors, this is a way to enter companies that they believe will outperform the market over time or increase their shares.

2）Choose stocks tend to pay dividends. Almost all dividend paying companies are profitable and have stood the test of time, which means that they have passed the recession and / or large-scale market correction before. Historically, dividend paying stocks have performed much better than non dividend paying stocks for a long time.

3）Buy defensive stocks, or stocks of companies operating in industries with basic needs. Companies that provide electricity, water or waste management provide basic essential services, and these companies should not be affected by Wall Street fluctuations. Similarly, consumer stocks that focus on non essential food and household products, as well as health care stocks, are defensive stocks that can outperform the market when the market plummets.

Best luck with your investing.