March 20, 2020

Escalator on way up. Broken elevator on the way down.

I have been waiting for a close under 2350 to write this post. Today the $SPX closed at 2304.92.

Markets slowly grind up. But crash quickly. How quickly? I will be looking at each new drawdown low since the market top on February 19, 2020 and then seeing how many days of market gains were erased since the previous time

The Chart

Click on the chart to see the full image.

 

The dates below are new maximum drawdowns since the market top.

February 21, 2020

Market closes at 1.4% drawdown. Erases 6 days of gains.

February 24, 2020

Market closes at 4.7% drawdown. Erases 5 days of gains.

February 25, 2020

Market closes at 7.6% drawdown. Erases 38 days of gains.

February 27, 2020

Market closes at 12.0% drawdown. Erases 38 days of gains.

February 28, 2020

Market closes at 12.8% drawdown. Erases 2 days of gains.

March 9, 2020

Market closes at 12.0% drawdown. Erases 93 days of gains.

March 12, 2020

Market closes at 26.7% drawdown. Erases 102 days of gains.

March 16, 2020

Market closes at 29.5% drawdown. Erases 7 days of gains.

March 20, 2020

Market closes at 31.9% drawdown. Erases 470 days of gains.

 

All market gains back since February 9, 2017 have now been erased. 760 days of gains lost in 22 days.

The markets need to fall another 34% from the current close to match the 2008 drawdown. There is still a high possibility of more pain.

Be careful trading now.

Backtesting platform used: AmiBroker. Data provider: Norgate Data (referral link)

Good quant trading,

Click Here to Leave a Comment Below

Sachin Vaidya - March 21, 2020 Reply

HI Cesar,

It was great to see your blogs, i wanted to join your amibroker course. But unfortunately i am not able to signup due to non visibility of CAPTCHA and it is necessary to add that in into the page.

Can you help?

Thanks

Sachin

    Cesar Alvarez - March 21, 2020 Reply

    I have emailed you.

Rasoul - March 26, 2020 Reply

This clearly shows that capital is coward.
Markets may take a long time to fill with buyers.Maybe weeks, months and even years.
But in less than a few days, with negative news, all buyers will be empty
……….

Markets fell for nearly a month. Prices could not come above the 10 day moving average. I think our profits should be Low profit and low risk but not high profit with High risk. logical profits like Close>MA(5) Or Rsi(2)>65 are very useful.

I learned two things from this financial market crash…

First, be sure to use an indicator to filter the trend, like MA200.
Because trends return very quickly and if we don’t get along with them, we’ll be out of the game

The second goes back to Jesse Livermore and Paul Theodore Jones who say: “Losers Average Losers”.I think that means that if the market trend changes, it should not be added to previous trading volumes.Because there may be heavy market crashes and without reversal.
Thank you for sharing your ideas.
Excuse me if my English is weak.

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