During the 2008 collapse there were at least 6 bounces of 8% or more on the way to 666 on the S&P, which turned out to be the ultimate bottom and bounce. The sell-off started slowly and thus the bounces tended to the mild side, and when the crashes ultimately occured during the later phase, the bounces and rallies were ultimately stronger. The bounces ranged from 8% at first to 27% before the ultimate bottom. The year 2000 collapse started somewhat more forceful and the bounces tended to be somewhat even all the way to the bottom. The 2015/16 correction has started even more tumultuously than either those two bear markets. The first bounce off the August/October low was nearly 13%, which ripped the faces off many on the short side, creating the most pain. We are now probably on the start of a new bounce. There are two reasons (aside from obvious over-sold conditions on the technicals) that we could see a rally here. First, is that the central bankers of the world are once again active. The FED itself wll be having their meeting this week. We all now know what the normal market reaction is to the FED meeting schedule - See Story Here. The second, is the fact that the corporate buy-backs can once again kick into high gear once earnings season winds down. The wild card? Oil of course. Energy (and basically the fear that there will be massive credit defaults) has been the tail wagging the market dog. I will probably play the big picture by adding into market shorts as the S&P rises from this correction. Starting small and averaging in. The new mantra is to sell the rally - not buy the dip. We shall see.
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The first week of 2016 has been the worst in the history of the stock market. My January Effect portfolio has been reduced to smoke and ashes. I did have some shorts on for a hedge, but not nearly enough. I had individual company issues also: SKUL warned of a bad holiday season and the stock tanked 25%. This was the largest holding in the portfolio. So far I have sold some positions but I am holding others, as most technicians believe we should see a bounce here in the general market for the next week or so. Long term though, most are looking for a much larger correction (as do I).
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Paul SaadSenior Manager, Paul Saad and Associates, LLC Archives
May 2020
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