2008 or 2016?
2008 or 2016?
In the early onset of 2016, there are many interesting facts that seem to correlate nicely with 2008. One interesting stat: As of 2/12/16 the S&P 500 is down 10.5% in the 1st 28 trading days of 2016. Worst start to a year in market history. The second worst start in history was 1948 and the first 28 days saw a decline of 9.2%. The third worst start? Well, 2008.
With recent movies glorifying the 2008 crash (like The Big Short, Wall Street 2, Margin Call) and a select few others, more people than ever are aware of the volatility, fear and panic that set in during such events.
China is also being riddled with hard economic news. CNBC posted a really intriguing article not too long ago about China's woes.
As of 2/12/16 I am keeping a neutral perspective on the longer-term market. As each day passes, it's becoming less and less likely that the markets will bounce. Major ETF's like XLE, IYT, XRT and importantly the IWM, have totally confirmed bearish in my opinion. They have broken supports, trend lines and moving averages on all major time frames. They are also making lower lows and lower highs. These are the first signals of impending bearishness.
Our objective in a bearish market is to protect ourselves from wild volatility, movements and gaps. Options can be a great tool in bearish markets to protect as insurance positions, rather than using hard stops. An example would be buying puts or shorting shares, and having OTM call options as an insurance to protect in the event of a wild whipsaw, but a continuation lower.
Regardless of what happens in the market, from a pure technical approach I have also found some very similar patterns in the financial markets. Below, feel free to join me in a game I call 2008 or 2016?
*Answers are below the chart*
This is the entire Financial Sector [ticker XLF]: Right pane is 2016
These are just some technical comparisons of some financial stocks. Here's another chart on XLF that's slight interesting.
This is Capital One Financial [ticker COF]: Right pane is 2016
This is Morgan Stanley [ticker MS]: Left Pane is 2016
This is Interactive Brokers [ticker IBKR]: Left Pane is 2016
Interactive Brokers is quite similar to other brokers like Charles Schwab or E*Trade which all currently have undeniable reversal signals, along with their charts in 2008.
If you are interested in how to make money while stocks are going down, take a quick peak at this two videos:
Thanks so much for reading this article! I hope you found this enriching! Until the next one, remember, love life - Live life and Trade it!