Crono-Crash & The Slingshot

Crono-Crash & The Slingshot

Livio,

I exited with the Wealth Preserver on the on March 2nd.  The last couple of bullish days brought to mind the Slingshot, are we there and have we missed the first 2 days. In your recent Celente video post you mentioned we’re entering into a global depression which may be even worse than the Great Depression.

Before all that happens is it possible we see DOW tumble another 5K-10K?

There seems to be an incredible amount of liquidating-at-all-costs mentality at the moment. I worked on an equity desk during the 2008 crisis, and currently at a very small non-bank FX dealing desk and have never seen anything like this. Your feedback is always appreciated.

Thanks,
Victor

“Great Question Victor.

The simple answer is NO.

The worst-case scenario appears to be testing the reversal technical line in the 15,000 level and do not see a drop to 5-10K. That is way too far for a slingshot. 

I see the slingshot build and breakout to new highs by 2023.

However, let’s tale a look at history to guide us on recovery times with similar drops to our current CronoCrash. 

Look at the two charts below.

What you see is that it took 65 months from the 2007-2009 Crash to get back to even.

The 1987 Crash appears to be a likely type of pattern from a timing perspective to our current Crono-Crash. That was a 53% decline and took 24 months to break even.

The 2000 -2003 Bear Market was a 3 year 54% decline and took 81 months to break even. 

If we were to fall on par with those declines, we would be looking at a drop to the mid-15000 level.

Because InterAnalyst members s stepped aside (red signals)  for most of the Corona-Crash, they will miss all those months of recovery just to get back to even.

More importantly, while everyone else is back to even, those who stepped aside will be 100% – 400% ahead of those buy and hold investors who did not step aside of the Corona-Crash.

As for the future, when we get back in (green signal) we could reach the test of just below the 40,000 level happening in 2024.

The Stock Market Holiday Effect

The Stock Market Holiday Effect

The Stock Market Holiday Effect

The holiday effect shows that stocks tend to rise on the day after market holidays.

One explanation of the holiday effect is that the market rises by an adequate amount in order to make up for the lost trading day. However this theory runs contrary to what happens when markets reopen after the weekend, known as the Monday effect.

An alternate explanation for the anomaly is that investors come back to their desks in a more optimistic mood and are therefore more likely to buy equities.

Another idea is that while US markets are closed for the holiday, foreign markets are direction-less and less liquid. They tend to drift higher resulting in a higher open for the US market on the day after the holiday.

Of course, as with all the market anomalies we are discussing, there is also the possibility of data mining or natural variance. Just because a market anomaly worked in the past doesn’t mean it will continue in the future.

The following chart from Stern NYU shows how average returns for the first trading day after a holiday have been net positive for all holidays except the Fourth of July. The day after Labor Day is best with an average return of almost 0.40%:

stock market anomalies holiday effect

Strategy:

You can buy stock index futures or baskets of stocks on the close of trading before a market holiday. You can then exit at close on the next full day of trading to lock in gains from the holiday effect.

I hope this little secret will pay for your entire holiday season!

Happy Thanksgiving

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