Last week was a historic one in the stock market, with a horrific one-week drop. The drop last week was one of the top six one-week drops in the stock market since 1929.!!! And, that hurts. But still, last week's drop was NOT a stock market "crash". Remember, in street talk a "dip" is a drop less that -10%; a "correction" is a drop between -10 to -20%; and a "crash" (or bear market) is a drop of more than -20% (usually between -35% and -60%).
Furthermore, strong up-markets (bull markets) normally DO NOT just drop from all-times highs to a bear market in a matter of days or weeks. There are way too many things that go into the conditions that would turn a bull market into a bear market in a one-week period (or even in a one-month period). To see that in more detail, please look at the graph immediately below. This graph is with monthly bar-charts. As you all know, the last two bear markets happened in 2000 and 2008. What you may not know is that both times the S&P 500 market "waffled" near the top for 12-15 months in a tight, rather flat range; and they DID NOT collapse until the market broke the up trend-lines to the downside. At this time, the S&P 500 Index is way above its trendline, but that could change in s short period of time.
STOCK MARKET CRASHES SINCE YEAR 2000
THIS IS WHERE THIS BLOG GETS INTERESTING.
There is a good possibility that what is happening now in the market now is just another of the many "V-Bottom" patterns that are popular in bull markets, and you most likely would like to see how MIPS has performed when in these patterns. The graph immediately below shows V-Bottom markets in 2014, 2016, 2018-19; and the graphs following that one is how MIPS3 actually performed in each V-Bottom pattern (as verified by TimerTrac.com). As you will see in the graphs below, with V-Bottoms sometimes MIPS goes to cash, other times it stays long; and in true prolonged bear markets MIPS will be short or in cash most of the time.
See the 2008 graph below. Between 2007-09, MIPS3 was up +138% when the SPY hit its low point with a -55% loss !!! Please note that the stock market had degraded slowly for several months before the big drop hit.
Red - SPY
Blue - MIPS3
Paul Distefano, PhD
CEO / Founder
MIPS Timing Systems, LLC