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"History doesn't repeat itself, but it often rhymes"

10 April 2020 4:18 PM | (Administrator)

Situations occurring in the present that drive the basic emotions of fear and greed are unlikely to have occurred in the past, but the emotions, and how we allocate money during those time periods are often similar---and therefore quantifiable.  

The good news out of New York today in its fight against the coronavirus, is for the first time, there is a negative number of ICU admissions for the first time since the pandemic started.  HOPEFULLY, this is not a "one-off" event, and that we can begin to see a flattening of the curve and a return to normalcy.

This weekend, Marketwatch penned an article stating that March's lows will be re-tested and gave a time frame of 137 days, or August 7th, to be exact.  While we don't officially have a position on whether or not the bottom will be re-tested, we do have software that does allow us to see what has occurred subsequent to prior bear markets that had highly-correlated price action with the current one.  

First let's look at 1987:

Correlated to the current market, should a retest occur, it will be on or near April 28th.

Our next example is the Asian Contagion market of 1998--fears of a domino-effect of defaults swept the countries in the Pacific Rim weighing on global financial markets.

Should a re-test occur, according to this analog it would occur near April 23rd.

Our final example is the Gulf War of 1990-1991.  Original estimates were that the conflict could evolve into a much large Arab vs. Western world conflict and estimates put American combat deaths at over 50,000.  Given this analog:

Should a retest occur, it will be around May 4th.  

Our difference of opinion isn't whether or not a retest will occur, it lies in the fact that our analysis shows that if a retest is going to occur, it should happen by the end of April or the first week of May.  Given the amount of Fed liquidity, and the positive news out of New York today, we are hopefully optimistic that the market can continue its recovery.  More details will be in the Inner Circle this weekend. - The Leader in Quantitative Analytics
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