6 May 2022

The day after – #SP500 #Nasdaq100 #FTMIB #Oil – May 6, 2022 (pubblicato alle ore 09:16)

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Many titles can be found to comment on a day like yesterday.

And just yesterday I wrote an article – Irrational Euphoria – that tried to explain exactly what was happening.


FTMIB -0,6%
DAX -0,49%.
EuroStoXX -0,76%.
Nasdaq 100 -5,06%
S&P500 -3,56%

VIX +22,74%.

BTP/Bund spread is at 200 and oil has reached 109 dollars per barrel

Huge volatility and billions burned

Nothing happens randomly. The movements of these days, and those of the coming weeks, will burn several billions of assets. And most of all small savers will end up in the meat grinder. That’ s how the system makes money. Many lose, someone becomes rich.  Such large excursions cause stop losses of leveraged operations, nailing inexperienced traders, calling margin calls to those who have ventured into dangerous operations. All movements are handled by machines that follow a ruthless logic, just half a word less or more in a public speech of an important person, make the leveraged order book go crazy and prices skid like a car that brakes on ice.

S&P500 – quarterly candlestick

Here is the SP500 quarterly candlestick.  Let’s analyze the previous downturns starting in 2000. The index lost 50% of its value (Nasdaq -83%) and took 1000 days to fall, there were quarters in which it recovered 10% and the descent stopped when prices returned to the values of 5 years before.

Then the crisis of October 2007, prices fell 57% in 460 days the descent stopped when values went back 7 years, with a peak of 18 years in the last quarter. 18 years of the stock market vaporized.

Then there’s the Pandemic mini-crisis – which only seemed like a disaster to us because it happened the day before yesterday. A 35% drop in less than a quarter with values going back 3 years.

We could also go back in time to the crises of 70, 87.  However, the story is always the same, at a certain point you have to unload the bags on the “donkey” that can no longer bear the weight and you create the conditions and narratives to burn billions. This is exactly what is happening now. The timing and modalities are unknown to anyone, it is a fluid, slippery system.

There is no technical analysis, no fundamental analysis, no artificial intelligence, no financial guru, that can in any way make a shred of valid prediction. Here the winner is always the one who holds the bank, that is the one who has billions of capitals and who decides which way the world goes, with its times and ways. Nothing happens by chance.

Statistical exercise

Trying to do a statistical exercise, we can see that the deep drops are between 35% and 60%, for now the SP500 has lost 13% (remember this). Furthermore, every time there has been a fall, the 20-period quarterly average has approached or just touched the 50-period quarterly average, stopping the descent.  Does this mean that this time we are going to fall as much ? I can not say (nobody knows), but the conditions are there.

When the bottom is reached and the market is exhausted, it restarts and changes the narrative.

On the right side

Some who are on the right side of the market have said :

“The time to buy is when the blood is flowing in the streets.” – Nathan Rothschild
“One must be fearful when others are greedy and greedy when others are fearful” – Warren Buffett
“The stock market is a story of cycles and human behavior that is responsible for overreactions in both directions.” – Seth Klarman

This is just our trading and not an invitation to trade in the financial markets.


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