Simply How Far Will This Bear Market Collapse? – Funding Watch

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By Graham Summers, MBA

Shares are at the moment in a bear market. The common bear market is 9 months lengthy and sees shares lose 30%.

So far this bear market is six months previous, and shares are down simply 21%. So, the difficulty is figuring out simply how a lot additional we’ve got to go.

As I’ve talked about beforehand, on the very least we are able to count on this bear market to see the S&P 500 break down to the touch its 40-month shifting common (this is identical factor because the 200-week shifting common). The 40-MMA is illustrated by the crimson line within the chart under.

The larger query is what occurs there.

In the course of the COVID-19 crash, the Fed moved to assist the complete monetary system. That’s the solely factor that stopped shares from coming into a full-scale disaster.

Throughout a full-scale disaster, the S&P 500 normally breaks its 40-MMA after which wipes out nearly the whole thing of the earlier bull market’s beneficial properties. I’ve illustrated this with blue rectangles within the chart under.

An identical transfer this time round would imply the S&P 500 falling to at the very least 1,750.

Will this occur? It’s definitely doable. As I discussed a second in the past, the one factor that pulled the market again from the brink in 2020 was the Fed shifting to ease financial situations in a rare method.

This time round, the Fed is making an attempt to deal with inflation… so easing would solely worsen the issue! The Fed has solely raised charges to 1% and can start shrinking its steadiness sheet on June fifteenth… and shares have already misplaced 20% of their worth.

What occurs when the Fed is compelled to boost charges to FIVE p.c or extra. What occurs when it tries to shrink its 9 TRILLION greenback steadiness sheet by $1+ trillion.

You get the concept.

The Mom of All Collapses is coming!


















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