Angel Falls

This is a monster waterfall decline.  The excesses that have been building up for years through central banks, tax cuts fueled by huge budget buster deficits, and finally investor complacency and exuberance after the US/China phase 1 trade deal are now coming home to roost.

Other than the Nasdaq bubble popping in spring of 2000, there has been nothing like this kind of selloff coming from an all time high.  Even the fall of 1987 had a small downtrend forming before the big waterfall hit.

You cannot compare it to October 2008 because the market was already in a bear market before the steepest decline happened.  And this is much much worse than anything we saw in 2011 or 2015.   The economy will be much weaker than anything we've seen since 2008, and its likely that it will be worse than 2008 because this coronavirus will probably come back even stronger in the fall, if it follows a pattern like H1N1 flu in 2009.  

There will be a playable bounce soon, but with this kind of selling, there could be margin calls waiting to happen and that could push this market even lower than where it normally would bottom.  SPX 2600 was a strong support level in 2018, but it was such a long time ago, it reduces its significance.  Of course there is a lot of psychological support at 2500, and above that, the February 2018 low at 2530.  So there are levels that traders will try to bottom pick here, and eventually one of them will stick for a multiday rally.  But the fundamentals are deteriorating so much and the economic picture is getting gloomier by the day, as the US government delays virus containment strategies in favor of trying to rescue the stock market.  That is a humanitarian disaster waiting to happen.

The plunge you are seeing overnight is the reaction to Trump's stock market saving approach, rather than a virus containment approach, which the stock market would actually prefer because it knows the longer the government delays serious action, the worse it will get for the economy.

For those who don't remember Nasdaq 2000-2002 bear market, it was a brutal one, and one that kept going and going.  SPX in 2020 is shaping up to be similar to Nasdaq in 2000, with a long bull market top forming followed by a sharp waterfall decline.

Right now, we're in a similar point as the middle of April 2000, which means that if this market follows the dotcom bubble path, then we should see a strong bounce within days, and then a retest at a slightly lower low in about 30-40 days.   

This being a Thursday, there is looming weekend risk and I am sure investors will not be looking to chase stocks higher heading into another headline driven weekend coming up.  But we are definitely in the panic capitulation phase now, and those are violent but usually brief.  I expect there to be a strong bounce next week, so the risk/reward is definitely getting more favorable for the bulls.