To begin, consider the cyclical nature of crises. Having made a request to Google , you can see the dates of economic crises over the past 100-150 years and find out that the average value between global economic crises is about 11 years. Since the last crisis of 2008 12 years have already passed, which prompts n thought: "is it time?".
With the cyclical nature everything seems to be clear, but let's turn to the fear index, it will also tell you what happens with options for the s & p500 index. A value above 50 indicates an increased fear of institutional market participants and also that money comes out of stocks and invests in gold and bonds.
As you can see, the fear index also speaks of entering the economic crisis, and this is the second reason to think about the further growth of your business, work and other sources of income, since in a crisis income is significantly reduced, prices are rising, production and marketing rates are falling.
But is not all. Take a look at the third point is the broad market index SPX500 . This index consists of the TOP-500 US companies and is a wonderful barometer for determining when the crisis began and when the market will only come out of it. It so happened that the key levels at which institutional groups turn are 10% and 20% rollback from historical highs. At the S & P500 , the historical maximum was around 3400, which means 3400-10% = 3060 and 3400-20% = 2720. Rollback from 3400 to 3060 is just a mini-correction for large players. In the range of 3060 to 2720 with a favorable economic background, there is a good opportunity to buy stocks of cheaper companies, and with an unfavorable background, as this time - an occasion to start fixing small drawdowns for now. But below 2720 begins the wholesale sale of shares by institutional channels, which provokes an even greater drop in the stock market.
Now being below 2720 - a crisis and an exit only above this value will be a signal to the end of the crisis, although from the point of view of , a reversal will occur at about 50% of historical maximums or 3400-50% = 1700.
The fourth point will be the FED interest rate and monitoring it, or rather, changes in it will be an important barometer. After the emergency meeting on March 3, 2020, the interest rate outside the plan was sharply reduced by as much as 0.5% to 1.25%, which is two times more than usual. The conclusion from this decline is that the United States is afraid of "sinking" along with the entire economic system. On the one hand, the measures taken to reduce should provoke taking cheaper loans for the development of production and the economy as a whole. I would also like to mention that the interest rate on March 18, 2020 will also be reviewed and a huge probability of a decrease to the level of as much as 0.25%.
Everything seems to be right. But if you look at the dynamics of changes in interest rates, the dynamics of prices of the s & p500 index and , you can see a simple relationship. And very obvious.
I think there are no unnecessary words. Everything has become very clear and I can "congratulate" everyone on the outbreak of the economic crisis. What can you ask? Getting ready. To what? To the bankruptcy of companies, reduced production, rising prices and unemployment. Well and the most important thing. How to avoid this? If the market is after March 18, 2020 If it remains below 2720, then it is important to shorten all stock indexes, buy gold and other consequences. But how to do it right and how not to “wander like a kitten”, then you need to improve your financial literacy and work on proven strategies. I propose one of these strategies in my training course.
Respectfully to all of you.
- Artem Yaskiv-