Probability of 34% Decline for S&P 500 by end of February 2022, High

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The S&P 500’s 10% decline from its January 4, 2022 all-time high on January 24th resulted in the index having a high probability to decline by an additional 24%, a total peak to trough decline of 34% by end of February 2022.

Additionally, unlike the quick recoveries from 2018 and 2020 double digit corrections, the S&P 500 is not likely to rally back to the 2022 high until 2037.  Its because the secular bull market which began in 2009 ended at the 2022 January high and was replaced by the fourth secular bear market since 1929.

The two events; 10% decline within 14 days from a secular bull peak spell disaster.  The two prior coinciding occurrences resulted in devastating peak to trough declines.

  • S&P 500, 1929-1932:  -85%
  • NASDAQ,2000-2002:  -78%

The prediction for a sudden and volatile 34% peak to trough decline is based on the SCPA (Statistical Crash Probability Analysis) algorithm’s statistical analysis of prior crashes.  The table below depicts the SCPA’s statistical analyses for all crashes from 1929 to 2020.  Each of the indices declined by a minimum of 34% after they had corrected by at least 10% within 14 days during a secular bull.  The S&P 500’s 10% correction for 2022 qualified since the decline occurred 13 days after the secular bull high.

The SCPA has a track record for predicting a 34% decline and market bottom.  It was utilized for my 3/7/20, 34% minimum decline and 3/23/2020 bottom predictions which were precisely accurate.   

The prediction for the 2009-2022 secular bull ending and the secular bear beginning in January 2022 was based on my research of the following:

  • All secular bull and bear markets for Dow Jones and S&P 500 since 1802
  • S&P 500’s PE multiples from 1921 to 2022
  • AAII investor sentiment readings from 1987 to 2021

A research report which provides the rationale for the secular bull which began in March of 2009 peaking in early January 2022, is in the process of completion and will soon be available.   

Based on the statistics for all prior secular bears since 1802, major US stock indices including the S&P 500 will:

  • steadily decline for eight to 20 years (2030-2042)
  • decline by 44% (S&P 1929-1942) to 93% (Dow Jones 1929-1949) when the low for the secular bear is reached
  • not exceed January 2022 highs until 2037 at the earliest

Since the S&P 500 has rallied and is less than 10% below its all-time high which potentially may not be exceeded until 2037, serious consideration should be given to liquidate all but small cap (market cap < $100 million) and low share price holdings.  To learn about what investments to have and not have during a secular bear market view secular bear market videos at AlphaTack.com whose slogan is to “grow assets against the wind”.

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