The S&P 500 officially entered into a bear market after a December 24th record decline of 2.7%. Prior to December 24, 2018, there had never been a prior Christmas Eve decline of even 1%. The decline of 15% for December puts the month on pace to become the worst ever when compared to all prior end of the year months. The S&P 500’s decline from its all-time high will reach 30% after it declines by another 10% to a temporary bottom of just above 2000, possibly as soon as year-end or in early January 2019. A US and global recession, has either already been underway or, just began due to December’s global market meltdown. December and year-to-date returns for Bull & Bear Tracker’s signals have increased to 44% and 132% respectively.
The S&P 500 will be unable to hit even a temporary bottom until it declines to below 2100 for two reasons:
- The probability has increased considerably that the US will enter into a recession at the beginning of 2019, if it has not already entered into one. The shock from the December crash will cause a decline in consumer spending. The December crash being the main topic of conversation at all Christmas day gatherings will definitely spook the consumer into retrenching. It’s what happened after the October 2018 crash. See chart below. The risk is high that those consumers who hold stocks will decide to make getting out of the market their New Year’s resolution.
- The technical support for the index as depicted in the chart below is approximately 2053.40. The horizontal line depicts that the S&P 500 had been under accumulation during the first half of 2016. When a market crashes the tendency is to go to previous accumulation levels. Therefore, the decline should at least temporarily slow down as soon at the S&P 500 gets to below 2100.
The odds of a recession happening are very high. The chart below depicts that the market has declined prior to the beginning of every recession over the past 90 years with only one exception. The market went up before the 1945 recession only because World War II ended in the summer of 1945.
Given that a recession will likely occur after the nine-year secular Bull Market reached its peak in September of 2018, the S&P 500 is likely to decline by at least 60% from peak to trough. This projection is based on what happened after prior mature secular bull markets reached their peaks in the past. The chart below which depicts the inflation adjusted coordinates for the 1982 secular bull which peaked in 2000 is a good example. The S&P 500 declined by more than 60% and the index did not eclipse its 2000 peak until February 2015.
To maximize upside in this highly volatile market I recommend a subscription to the Bull & Bear Tracker. Its Green and Red signals are utilized 24/7/365 to trade two triple leveraged S&P 500, ETFs including the SPXL (Direxion Daily S&P 500 Bull 3X ETF) and the SPXS (Direxion Daily S&P 500 Bear 3X ETF).
The statistics table below depicts that the for the 11 months the Bull & Bear Tracker’s published and back tested signals generated a return of 88%. With the 44% that the signals have produced during the first three weeks of December the year to date return increased to 132% which is equivalent to 11% per month. For more about how the Bull & Bear Tracker operates and how its Red signal produces profits in a down market and Green signal in an up market read my article entitled “Bull & Bear Tracker Gorging on Market Volatility”.
Subscriptions to the Bull & Bear Tracker are currently available for free. An automated alert and trade execution system is currently under development. Upon the development being completed subscribers will be able to have their trades automatically and seamlessly executed by an online broker. To subscribe for a 90-day free trial click here.
Now that the market has gone from a secular bull to a secular bear, I highly recommend spending time at www.BullsNBears.com. The videos on the home page are must views. The site is loaded with educational information about crashes, recessions and depressions. The dozen research categories below are covered: