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Market Lab Report - Market action after big one-day drops in the markets

In this Era of QE, central banks stand at the ready to pump more capital into the system should anything threaten the stock markets. We have seen this with respect to all major issues include the softening global economy, the trade wars, geopolitical tensions, tightening the Fed's balance sheet, Brexit, and now the coronavirus. Since QE began in late 2008, when the S&P 500 has correction more than 2% in one day, you can see from the table below that in all but one case, it was higher a week then a month later.



Keep in mind that in non-QE markets, a big one day drop can lead to even deeper drops in subsequent days such as in 1987 and 1929. In all cases since 1920, there was preceding material weakness in the price/volume action of major averages which enabled one to get safely to the sidelines before the massive drop.





In the present case, the market dropped sharply off all-time highs without any prior material weakness in the market averages. If 100 years of history repeats, markets should likely be higher a week to a month from now. That said, there is always the possibility of a first time, so always heed your stops.
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This information is provided by MoKa Investors, LLC DBA Virtue of Selfish Investing (VoSI) is issued solely for informational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. Information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of available data. VoSI reports are intended to alert VoSI members to technical developments in certain securities that may or may not be actionable, only, and are not intended as recommendations. Past performance is not a guarantee, nor is it necessarily indicative, of future results. Opinions expressed herein are statements of our judgment as of the publication date and are subject to change without notice. Entities including but not limited to VoSI, its members, officers, directors, employees, customers, agents, and affiliates may have a position, long or short, in the securities referred to herein, and/or other related securities, and may increase or decrease such position or take a contra position. Additional information is available upon written request. This publication is for clients of Virtue of Selfish Investing. Reproduction without written permission is strictly prohibited and will be prosecuted to the full extent of the law. ©2020 MoKa Investors, LLC DBA Virtue of Selfish Investing. All rights reserved.
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