Bull market dips for SPX are usually 5-15%. 5% is common, 15% rare, 20% very rare.
4819 ATH in January
4578 = -5%
4349 = -10% today
4096 = -15%
3855 = -20%
List of recession indicators says a recession is not imminent. Message 33708174 So a 20% dip would take unusual circumstances.
The only previous time the Fed tried to do QT, is the only data point similar to today. What happened to stocks?
SPX 2930 to 2417 = -18% (2018 high to low)
NYA 13637 to 11037 = -19%
QQQ 182 to 144 = -21%
IWM 166 to 121 = -27%
Back then, the Fed only tried to do QT. They gave up quickly, after only a trivial reduction in the balance sheet. Today, they have clearly signaled, QT will be started. So that is certain. It is unclear, whether they have the courage to do more than a token effort. But, last time, a token effort dropped stocks more than (so far) in 2022. A lot more.
Conclusion:
stocks have further to fall, especially hi-PE and small-caps. But we are still in a Bull Market, so this dip should be bought, eventually.
Plan:
Go long in small increments. Begin with Value Quality Dividend stocks.
Short IWM, QQQ, JDXJ (if gold spikes) on any rally, till SPX is -15% off ATH.
Go long Growth and small-caps, only when SPX is -15% = 4100
100% long, no shorts, no cash, at SPX -20%
Watch those recession indicators. If they turn negative, start raising cash. |
