RE: Buying Opp or Epic Turning Point?my favorite market analogy to our current situation has been 1973-74, which had a 55% collapse and 74% snapback rally.
https://www.ritholtz.com/blog/wp-content/uploads/2011/05/5-6-11-Swing-Analog-1974-2009.gif
However, as this market has continued to power higher, it has left 1973 behind, and is looking more and more like the Great Panic of 1907:
https://www.ritholtz.com/blog/wp-content/uploads/2011/05/5-6-11-Swing-Analog-1907-2009.gif
t’s not so much using the past to predict the future as it is observing the similarities
in how the market reacts to severe declines.
The fundamentals behind each series is different but fear and greed never changes.
Markets are fractal,
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IDEAL CORRELATION BETWEEN QE AND STOCK MARKET
https://static.seekingalpha.com/uploads/2011/3/9/403065-129964850800513-Eric-Parnell_origin.jpg
What do you need to push SP500 100% up -- oh ,just pocket change of printing $ 2.55 T (1/3 China GDP ,1.5x Canada GDP)
There was a 5-1/2 month lag between the end of QE1 and the Jackson Hole speech,
and less than a 5-month lag from the end of QE1 to the beginning of QE1.5 rollover program.
7 months between end QE1 - start QE2
Assuming we are in a topping process this month, that would put a potential QE 2.5 in Oct-Nov 2011 low.
Next ,5 months without ,free, easy money .and inflation / commodity up- pressures ?
Start QE 1 November 25, 2008: $100 Billion GSE direct obligations,
+ $500 billion in MBS
S&P 500: 851.81
March 18, 2009: FOMC Statement: Expand MBS program to $1.25 trillion,
buy up to $300 billion of longer-term Treasury securities
S&P 500: 794.35
https://3.bp.blogspot.com/_pMscxxELHEg/TKj69XmPbEI/AAAAAAAAJcw/o8CXW_sBJaQ/s1600/SP500QE.jpg
End QE 1 Apr 2010
SP500 tanking for 2 months from 1215 to 1020= 17%
August 27, 2010: Fed Chairman Ben Bernanke hints at QE2:
S&P 500: 1064.79
Oct 2011 QE 2 STARTS =$ 600 B
SP goes up 1050 -1370= 34 %
June 2011 end QE 2
SP 500 May top 1370
TANK TO ??....
supports
1210
1180
1150= 16% ,also trendline support
1050= 23%
https://chart.finance.yahoo.com/z?s=%5eGSPC&t=2y&q=l&l=off&z=l&p=s&a=v&p=s&lang=en-US®ion=US
What type of correction can we expect?
Fortunately, the end of QE1 provides some insight. QE1 ended in April 2010,
and the stock market quickly plunged by 17% in just 10 weeks, into July 2010.
And stocks would have likely fallen further had the market not begun
to speculate that QE2 was coming around the corner.
Today, the market is 14% higher than it was at its peak in April 2010 at the end of QE1, so we should expect the magnitude of the correction at the end of QE2 to be easily -15% or more.
What about timing? The stock market decline last time around was coincident with the end of QE1.
This time around, many are anticipating the stock pullback at the end of QE2, so we should expect a move to the exits that slowly begins to creep in at least a few weeks in advance.
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CMK after end Q1 ( Top Apr 2010) tanking same as market
for 2 months $2.5 -$ 1= 60%
Now it is hard to say ... it is tanking because of company specifics
( management ripp-off of shareholders to the tune of $18m =options =dilution
and prospect of more dilution /debt = no money now, and missing expectations by like 1/2 )
Tank 32% so far ,so another 20- 30%?
To $ 2 - $ 1.5 ?
$ 1.5 by fall would be 2011 Jenning EPS of 25 c= P/E 6
But wih likely missing that EPS (delay of story by 1/2- 1Y )
+ after dilution, 20c EPS MAX = P/E 7.5