Today’s markets have circuit breakers and other protections to arrest a crash, but as we saw in 2020 the market can still plunge over 30% in just a few weeks.

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via wolfstreet:

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How often do we get a Bear Market after a strong bull market plunges to the 200-day moving average?

By Wisdom Seeker, WolfStreet Commenter with a physical sciences Ph.D., living in the San Francisco Bay Area, employed and anxious about his retirement portfolio.

Wild Bull:  As measured by the S&P500, a stock market that has risen more than 30% in 18 months.

Hibernating Bear:  The Wild Bull’s manic-depressive “dark side”, which often awakens when the market falls below its 200-day moving average.

Since mid-2020 the S&P500 index of large US stocks has been a Wild Bull, raging up over 40% in just 18 months.  But as Wolf reported yesterday, over the past 3 weeks the Wild Bull stumbled badly. The figure below shows the 18 months up to yesterday, when the S&P fell to its trailing 200-day “moving average”, a common measure of market health.  Such stumbles are both rare and frightening, since trillions of dollars in digital wealth evaporate in only a few weeks.

Worse, a drop below that 200-day moving average often reflects stark changes in market behavior – Hibernating Bear awakening – with potential for a long & deep bear market as in 2000-2003 or 2007-2009.


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h/t  mark000


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