Probability Is 87%That the Market Is at an Interim Bottom
How to understand and trade the COVID-19 market hurricane
Based on my crash statistical probability analysis the probability is 87.5% that the stock markets of the US and the five other leading developed countries, which have been crashing since February 20, 2020, have reached an interim bottom.
If the interim bottom has been made the statistical probability is 100% that the stock markets of the US, Japan, Germany, Canada, South Korea and France will experience powerful interim rallies that will result in double digit percentage gains as compared to their 2020 lows. This will occur within days of the interim low being made. What will likely drive the rallies for all of the markets before they reverse to fall to new lows is the US Congress passing a virus stimulus plan.
The probabilities and percentage increase targets in the above paragraphs were derived from my crash statistical probability analysis. The analysis was explained in two of my recent articles which warned my readers to get out of the market. As of March 23, 2020, the S&P had declined by 26% as compared to its closing price at March 6, 2020:
"US Stock Market to decline by another 22% by Easter", March 6, 2020
The new 2020 low made by the S&P500 for today, March 23 was poignant and increased the probability from 75% to 87.5% that the markets are near their interim bottoms. It's because the S&P500 broke through the crash probability analysis's 34% correction threshold. My articles of March 6 and March 9 explained the threshold's significance. The articles also made two very precise predictions for the markets of the crash inflicted countries that were relative to the threshold:
34% declines from their 2020 highs
Declines to occur by March 21, 2020
When the predictions were published on March 6, the corrections from their 2020 highs had ranged from 11% to 17%. By March 18, an index for each of the six countries had declined to or through the 34% threshold. South Korea and France were added after both of the articles were published. However, two of the US' indices, the S&P 500 had not corrected by 34%. The S&P 500 breached the threshold as of today (3/23/20) and got to 35.4% below its 2020 high. The Nasdaq's correction from its 2020 high is at 33.0%.
Upon the markets for the countries reaching their initial post-crash highs the probability is also 100% that they will then reverse and then decline by 52% from their 2020 highs. The steep declines to lower lows will occur by April 30, 2020 or before February 19, 2021, the first anniversary date of their crashes.
My ability to make precisely accurate predictions is due to the extensive empirical research that I have been conducting on the five most infamous market crashes in the table below. It's also because of the empirical research that I conducted on the 2008, back in 2016, that enabled me to develop an algorithm which predicted the Brexit crash in June 2016.
My research on the five crashes yielded a significant breakthrough. The two crashes, which were by far the most lethal, began in 1929 and 2000 and bottomed after 32 and 31 months, respectively. Both of these crashes had the same genealogy as the crashes that have been underway for the six developed countries since February 2020.
Based on my ongoing empirical research efforts regarding these same six countries, the statistical probability is 100% for the following events:
The markets will have declined by a minimum of 79% when they bottom.
The markets will bottom in fourth quarter of 2022.
It will take at least 15 years for the markets to return to their 2020 highs.
Deeper research enabled the identification of the statistical probabilities and patterns from the 1929 and 2000 crashes. The findings were then utilized to develop the indicated pathology for crashes of 1929, 2000 and 2020 as well as the projected pathology for all future crashes which have the same genealogy.
The pathology and statistical probability analyses are to be programmed into an algorithm named the Crash Tracker upon the satisfactory conclusion of my empirical research. The algorithm will monitor markets which are ripe for a crash. It will automatically issue get-out-of-market warnings for future crashes. Crash Tracker will forecast the following events and additional events as they unfold organically after a crash has commenced:
Interim low date range and target: enable those with cash to buy the market at the low and sell at the interim high before market reverses to make its final bottom
Interim high date range and target: enables those who did not get out to sell out at higher prices
Final bottom and date range for final bottom: enables long term by and hold investors to invest in something else while waiting for a bottom and reduces risk of buying prematurely and before bottom occurs
Number of years for a market that has endured a devastating crash to exceed pre-crash all-time high
My follow on article dated March 9th "2020 Crash is third ‘Category 5 Hurricane' in 90 years! Get out of market today!", was about the 2020 crash being equivalent to a "Category 5" designation which is assigned to only the most intense hurricanes. To elaborate on this article, the discovery of the genealogy, statistical probabilities and pathology to identify lethal market crashes are analogous to a hurricane's genealogy, statistical probabilities and pathology.
Unlike the stock market which has 100 years of available data, the ability to conduct empirical research on hurricanes only became available after the first plane few into the eye of a hurricane in 1943 to collect its barometric pressure. Since then, the forecasting of hurricanes has become increasingly accurate. The intensity, geographical location and arrival times for a hurricane are very predictable. The result has been a significant reduction in hurricane fatalities.
The same forecasting can now be done for market crashes. Instead of comparing barometric pressure readings, the Statistical Probability Analysis measures the degree of price volatility for market corrections which have the potential to become devastating crashes. For a market to have the same genealogy as the 1929, 2000 and 2020 crashes, it must reach a specified percentage decline threshold within a consecutive-daily-declines period.
The charts below depict the downward thrusts and velocity for the US S&P 500 and German Dax indices which began on February 20, 2020. On February 19, 2020 both of the indices had reached their all-time highs.
The chart patterns for the indices of four other countries including Japan, Canada, South Korea and France from February 19th to February 28th are almost identical. The patterns for the Dow 1929 and the NASDAQ 2000 indices for the week to 10-day periods prior to their corrections becoming crashes were eerily similar.
My fear is that the declines for the markets of these six countries could happen much faster and be much deeper than the 1929 and 2000 crashes. The probability of the first worldwide economic depression ever could occur.
For the following reasons, investors should consider an immediate liquidation of up to 50% of the stocks, mutual funds and corporate bonds that they hold:
That markets crashing simultaneously for six countries on three continents is unprecedented. The ramifications and the fallout could be devastating.
It's possible that the relief rallies might not get all the way back to their minimum 28% and 23% from-within-the-2020-high thresholds. As of the 3/20/20 close the S&P 500 was within 32% of its all-time high.
Have cash available to generate gains or recoup losses by utilizing:
1. Statistical probability thresholds to buy at the interim lows and sell at the interim highs.
2. Bull & Bear Tracker's (BBT) trend trading signals to produce cash. BBT, which is powered by another of my algorithms has been averaging returns of 5% per month. Read "February 2020, Bull & Bear Tracker's 8th consecutive profitable month" article. Finally, BBT thrives in volatile and declining markets.
To minimize losses and maximize gains, engaging a registered investment advisor (RIA) who has been vetted by BullsNBears.com is necessary:
The advisor must have trading experience and must have access to the Bull & Bear Tracker's signals. The signals are available only to clients of an approved advisor.
An advisor who has access to the statistical probability event thresholds needed to be able to liquidated obtain the best prices for the securities that are held and which are in need of being
To be referred to an advisor click here
My prediction is that the S&P 500's secular bull market which began in March 2009 ended on February 19, 2020. The ninth secular bear since 1802, began on February 20, 2020. Based on the peaks of the last three secular bull markets as compared to the troughs of the of the three most recent secular bears, the S&P 500 could decline by an additional 47% to 80% from its March 6, 2020 close.
The video of my "Secular Bulls & Bears: Each requires different investing strategies" workshop at the February 2020 Orlando Money Show is highly recommended. The educational video explains secular bulls and bears and includes strategies to protect assets during secular bear markets and recessions, etc.
Watch my 2:50 video about my track record for predicting bankruptcies, market crashes and rallies off of crash-bottoms.