SPY MA's: A revisit to 2008 for 2022 scenario
" What happened once in market will happen again."
I have been trying to improve my trading in the past couple months and have definitely made some progress, thanks to the community here who posts regularly and share their ideas and suggestions. Lot of swings have happened in a late week or so. Irrespective of all the swings there is a general consensus that the market is bearish and the bottom is not near yet. And everyone has been searching for the same questions:
1. What is the expected market bottom of the bear rally?
2. What and when should I trade?
3. When to end the trade?
A very common approach we use in my field is to develop a similarity in the work already done or events happened. When I started looking at the 2008 bear market events, saw several commonalities. The overall pattern of the 2022 drop is very similar to 2008 pattern when we look at the MAs. The question is how we can use the similarities to trade.
2008 [1] : In 2008 once the death cross appeared on weekly frame, a big drop happened in SPY. The 200 MA was touched twice before that big drop happened.
2022 [1] : In 2022 the 200 MA has been touched twice on weekly frame.
2008 [2] : A relief rally happened in the 2008 after second time the 200 MA was touched.
2022 [2] : A relied rally is happening in 2022 after 200 MA was touched the second time. There is potential here that the SPY might rally to 400, but I am not trading as it seems more risky at the moment to play long for me to get small benefits and have too much headache. I prefer my inner peace over small gains.
2008 [3] : SPY started moving down once the 20 MA crossed 200 MA during the rally.
2022 [3] : 2022 might show a move down once the 20 MA crosses the 200 MA.
2008 [4] : Once the death cross appeared on the weekly chart ( 50 MA crossing 200 MA) we saw a massive drop in the SPY.
2022 [4] : In 2022 the relief rally can increase the probability of a death cross happening. On a global stage the events happening currently can become a major trigger for such a move. The OPEC has decided to cut the oil supply by 2 million barrels which can significantly increase the gas prices across globe. During COVID the oil prices barrel dropped down to $20. If there is a recession why this will be a concern for the OPEC countries. The majority income source for the OPEC countries is oil and tourism. And COVID hit both of them. A similar situation might happen with tourism after the recession as people might reconsider travel to boost savings. In big corporates like google a significant cut back on employee travel has been seen. Increasing oil prices might have a ripple effect on the global economy. We might encounter a bad inflation data for November and see a more hawkish stance by Fed started a chain of events well supported by Brit Gilts and Europe's energy crisis.
So, What is the expected market bottom?
Looking at the recent data and 2020 COVID data, we touched the high of 2020 COVID rally (Aug-Nov before a bull run happened) and its a possibility that in the next leg down we might touch the COVID lows also.
I am looking to enter into trades as MAs start showing patterns similar to 2008 and will probably base my exit on the same.
Note: I am not a financial advisor and do not provide any financial guidance. These are just opinions and do not encourage an individual to take action.
I have been trying to improve my trading in the past couple months and have definitely made some progress, thanks to the community here who posts regularly and share their ideas and suggestions. Lot of swings have happened in a late week or so. Irrespective of all the swings there is a general consensus that the market is bearish and the bottom is not near yet. And everyone has been searching for the same questions:
1. What is the expected market bottom of the bear rally?
2. What and when should I trade?
3. When to end the trade?
A very common approach we use in my field is to develop a similarity in the work already done or events happened. When I started looking at the 2008 bear market events, saw several commonalities. The overall pattern of the 2022 drop is very similar to 2008 pattern when we look at the MAs. The question is how we can use the similarities to trade.
2008 [1] : In 2008 once the death cross appeared on weekly frame, a big drop happened in SPY. The 200 MA was touched twice before that big drop happened.
2022 [1] : In 2022 the 200 MA has been touched twice on weekly frame.
2008 [2] : A relief rally happened in the 2008 after second time the 200 MA was touched.
2022 [2] : A relied rally is happening in 2022 after 200 MA was touched the second time. There is potential here that the SPY might rally to 400, but I am not trading as it seems more risky at the moment to play long for me to get small benefits and have too much headache. I prefer my inner peace over small gains.
2008 [3] : SPY started moving down once the 20 MA crossed 200 MA during the rally.
2022 [3] : 2022 might show a move down once the 20 MA crosses the 200 MA.
2008 [4] : Once the death cross appeared on the weekly chart ( 50 MA crossing 200 MA) we saw a massive drop in the SPY.
2022 [4] : In 2022 the relief rally can increase the probability of a death cross happening. On a global stage the events happening currently can become a major trigger for such a move. The OPEC has decided to cut the oil supply by 2 million barrels which can significantly increase the gas prices across globe. During COVID the oil prices barrel dropped down to $20. If there is a recession why this will be a concern for the OPEC countries. The majority income source for the OPEC countries is oil and tourism. And COVID hit both of them. A similar situation might happen with tourism after the recession as people might reconsider travel to boost savings. In big corporates like google a significant cut back on employee travel has been seen. Increasing oil prices might have a ripple effect on the global economy. We might encounter a bad inflation data for November and see a more hawkish stance by Fed started a chain of events well supported by Brit Gilts and Europe's energy crisis.
So, What is the expected market bottom?
Looking at the recent data and 2020 COVID data, we touched the high of 2020 COVID rally (Aug-Nov before a bull run happened) and its a possibility that in the next leg down we might touch the COVID lows also.
I am looking to enter into trades as MAs start showing patterns similar to 2008 and will probably base my exit on the same.
Note: I am not a financial advisor and do not provide any financial guidance. These are just opinions and do not encourage an individual to take action.
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