150 Months seem to be the limit for Bull Markets

150 Months seem to be the limit for Bull Markets

Summary:  Bull markets seem to have a life span of 150 months. That amount of months have now been reached. We could be in for a larger correction coming in to the "Jinx" month


In 1987 the Financial world was hit with a major crash in Equities. Starting in September within two months S&P500 dropped 35% with most of the sell-off taking place in a few days in October. 19th October alone market dropped 20%.
It took two years to recover and from there on market didn’t look back much. Until 150 months later where we saw the peak in the .com bubble March 2000 with a gain of more than 600%. Of course with a few corrections on the way to the peak, most notably the major correction in August-September 1998 the famous Long Term Capital Management Fund collapse. Market got saved by FED.

In 2008 the Housing bubble/Credit crisis also known as the Financial crisis hit the markets sending the S&P500 down with more than 50%. Markets bottomed out in March 2009. Here the recovery took a bit longer almost 4 years. However, a long term bull market was founded.
A few major corrections since with the biggest one last year due to world-wide lock downs only shortly halted the bull market. A bull market where we have seen gain of almost 600% but that could very well has come to an end. 150 months since the March 2009 trough.

The development on RSI is interesting. Every time there has been major Divergence on RSI it has been followed by a big correction, crash or major bear market. On the chart the Divergencies are  indicated with the blue falling lines on the RSI peaks. The current period with divergence is the second longest period with divergence lasting more than 3½ years. During the .com bubble it lasted a few months longer.

Falling RSI values while prices are rising is an indication of a weakening trend. Divergence can go on for quite some time but not forever, eventually is has to be “traded out” i.e. either a new higher high or a drop below 40.

The first Monthly chart going back to 1986 is a Logarithmic scale chart to better illustrate the magnitude of the previous corrections/down trends compared to today’s market.

Zooming in on the Monthly chart (second chart) we can see that September formed a Bearish Engulfing candle which is a top and reversal candle. Bears seem to have taken control from in September.
With the S&P500 is being very far from its Moving Averages, it is in fact the farthest it has been from it since during the Financial Crises and during the built up to the 1987 crash, it is ripe for a correction. Does this mean we will see bear markets/crash like in 1987? No.  
But it means we could be in for a larger correction/down trend. Possibly down to around 3.700-3.650 i.e. a correction of approx. 15% from currently levels. Whether it will be swift or a slow bear market is impossible to predict. However, October is called the Jinx month for a reason, it is historically the month with the most market crashes/major corrections. But let’s see. Keep your stops close.
     
For this bearish scenario to be demolished S&P500 needs to take out previous (September) high.

Source: Saxo Group
Source: Saxo Group
Disclaimer

The Saxo Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-sg/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Saxo Markets
Most of our staff in Singapore are working from home to help limit the spread of the coronavirus. We remain at your service on the details below. Thank you for your understanding.

Contact Saxo

Select region

Singapore
Singapore

Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-sg/about-us/awards.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website are not intended for residents of the United States, Malaysia and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.