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Market Direction

Our View on Coming Market Direction

August 10 , 2014

We believe that recent market dip has come to an end. We will see continued market rebound in the next two weeks. During the last 12 months, market had 4 dips and all recovered nicely. Our current dip is the fifth one within a year and should recover nicely as well.

Let us use S&P 500 as an example to take a closer look at how each dip developed and recovered:

Dip 1

2013
dip
recover
date of development
Aug 05 -> Aug 27
Aug 28 -> Sep 18
duration (days)
17
15
index changes
1710 -> 1630
1630 -> 1735
point of changes
-80
+105

Dip 2

2013
dip
recover
date of development
Sep 19 -> Oct 09
Oct 10 -> Oct 29
duration (days)
15
14
index changes
1735 -> 1650
1650 -> 1770
point of changes
-85
+120

Dip 3

2014
dip
recover
date of development
Jan 16 -> Feb 03
Feb 04 -> Feb 19
duration (days)
12
11
index changes
1850 -> 1740
1740 -> 1845
point of changes
-110
+105

Dip 4

2014
dip
recover
date of development
Apr 03 -> Apr 11
Apr 14 -> Apr 22
duration (days)
7
6
index changes
1895 -> 1815
1815 -> 1885
point of changes
-80
+70

Dip 5 - current, still in development

2014
dip
recover
date of development
Jul 24 -> Aug 07
Aug 08 -> ?
duration (days)
11
?
index changes
1990 -> 1905
1905 -> ?
point of changes
-85
?

In fact, S&P 500 fell to as low as 1,891 during overnight trading last Friday to make it a 100 point drop before rebounded.

Observations: It took about the same number of days to recover after each dip. During each drop, S&P 500 was down about 80-100 points and all the point loses were recovered after the recovery. If history repeats one more time, it may take about 10 days for the market to recover and the S&P 500 should go back to 1,990 level again.

 

 

 

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