It's just a correction until we break this trend line
To be a truly successful investor, you have to have very long time horizons. Most of us track trends for days or weeks, but big investment banks and algorithm-driven "smart money" track trends for years or decades. This requires patience that most people can't muster. With that in mind, let's look at some long-term trends in the S&P 500 to see where we might want to enter.
The S&P 500 has maintained the green trend line for over 10 years, since the end of the last recession in 2009. As you can see, there's plenty of room for the S&P 500 to fall before it hits this trend line, say around 2550 (down 12% from the current level). I expect we'll get there within the next couple months.
Then comes the real test: will the market continue to hold its long-term uptrend? Or will we break the trend line support, signaling that the correction has turned into a full-fledged bear market? In the last couple recessions, the S&P 500 finally bottomed at about half the price at the preceding market top. For a hypothetical 2020 recession, that implies a bottom at about 1700, shown as a red horizontal line here on the chart.
Thus, the long-term play is pretty simple: buy the trend line, and sell if it breaks. Wait to re-enter at about half the market top. If you have the patience, you may be able to get in on the ground floor of the next bull market for another 10-year cycle. Embrace the wait, and good luck!
The S&P 500 has maintained the green trend line for over 10 years, since the end of the last recession in 2009. As you can see, there's plenty of room for the S&P 500 to fall before it hits this trend line, say around 2550 (down 12% from the current level). I expect we'll get there within the next couple months.
Then comes the real test: will the market continue to hold its long-term uptrend? Or will we break the trend line support, signaling that the correction has turned into a full-fledged bear market? In the last couple recessions, the S&P 500 finally bottomed at about half the price at the preceding market top. For a hypothetical 2020 recession, that implies a bottom at about 1700, shown as a red horizontal line here on the chart.
Thus, the long-term play is pretty simple: buy the trend line, and sell if it breaks. Wait to re-enter at about half the market top. If you have the patience, you may be able to get in on the ground floor of the next bull market for another 10-year cycle. Embrace the wait, and good luck!
