This week the S&P 500 closed Friday at a 2022 low of 3693. As such, this might be a good time to take a look back and see what history can tell us. On 19 February 2020 the S&P 500 set a pre-pandemic record high of 3386. On 23 March 2020, only one month later, the S&P 500 hit a pandemic low of 2237. Over the next five months, on 18 August 2020, the S&P 500 returns to the pre-pandemic high of 3389, making it historic in that this cycle had the fastest decline and recovery ever. From there the Bull was in charge through the 3 January 2022 closing bell, the first trading day of this year, when the S&P 500 made a new record of 4796. And as mentioned above, we now stand at 3693. So, what else is recently historic. Looking back to our 13 August 2022 update, we stated that the S&P 500 crossed the significant 50% retracement level. On 3 Jan of this year, the S&P 500 set a new record high of 4796. The subsequent low was 3666 on 16 June. The halfway point between the two was 4231, and the S&P 500 closed above that on Friday. In data going back to 1950, the S&P has never returned to its low after closing above a 50% retracement. Well, never say never as the S&P 500 made history on Friday when it had an intraday low of 3637. So now, instead of looking at the 2020 historic one-month bear market, lets look back to similar circumstances, or previous long, painful historic bear markets. The most recent one was the housing market bear. Between October 2007 and March 2009 (17 months), the S&P 500 dropped 57.7%. Next was the dot.com bear, between March 2000 and September 2002 (30 months), with the S&P 500 losing 48.9%. The average loss of those two long, painful bear markets is 53.3%. If you applied that to the 4796 record high, it would bring us down to the 2,239 level, or as noted above, close to the pandemic low of 2,237. With global interest rate hikes, inflation, recession, and the nuclear option being mentioned in the Ukraine/Russian war, concerns are running high and the outlook could be quite dire. We have also seen earnings guidance numbers being reduced, which does not bode well for Octobers earning season. For TSP TIPS, two key bullish levels for the S&P 500 are 4,038, the 50 day Moving Average, and 4,119, the high of the last two down weeks. Given where we are now (3,693) and the above-mentioned history, we are recommending the following bearish reallocation.
This week the S&P 500 closed Friday at a 2022 low of 3693. As such, this might be a good time to take a look back and see what history can tell us. On 19 February 2020 the S&P 500 set a pre-pandemic record high of 3386. On 23 March 2020, only one month later, the S&P 500 hit a pandemic low of 2237. Over the next five months, on 18 August 2020, the S&P 500 returns to the pre-pandemic high of 3389, making it historic in that this cycle had the fastest decline and recovery ever. From there the Bull was in charge through the 3 January 2022 closing bell, the first trading day of this year, when the S&P 500 made a new record of 4796. And as mentioned above, we now stand at 3693. So, what else is recently historic. Looking back to our 13 August 2022 update, we stated that the S&P 500 crossed the significant 50% retracement level. On 3 Jan of this year, the S&P 500 set a new record high of 4796. The subsequent low was 3666 on 16 June. The halfway point between the two was 4231, and the S&P 500 closed above that on Friday. In data going back to 1950, the S&P has never returned to its low after closing above a 50% retracement. Well, never say never as the S&P 500 made history on Friday when it had an intraday low of 3637. So now, instead of looking at the 2020 historic one-month bear market, lets look back to similar circumstances, or previous long, painful historic bear markets. The most recent one was the housing market bear. Between October 2007 and March 2009 (17 months), the S&P 500 dropped 57.7%. Next was the dot.com bear, between March 2000 and September 2002 (30 months), with the S&P 500 losing 48.9%. The average loss of those two long, painful bear markets is 53.3%. If you applied that to the 4796 record high, it would bring us down to the 2,239 level, or as noted above, close to the pandemic low of 2,237. With global interest rate hikes, inflation, recession, and the nuclear option being mentioned in the Ukraine/Russian war, concerns are running high and the outlook could be quite dire. We have also seen earnings guidance numbers being reduced, which does not bode well for Octobers earning season. For TSP TIPS, two key bullish levels for the S&P 500 are 4,038, the 50 day Moving Average, and 4,119, the high of the last two down weeks. Given where we are now (3,693) and the above-mentioned history, we are recommending the following bearish reallocation.