Regression to the mean……regression to the mean.
I believe it was a lesson once taught in grade 4 mathematics, now rearing it’s ugly head in stock portfolios – planet wide.
Like an elastic band, or perhaps a fold in time and space – matter stretched beyond any reasonable degree….finally “snapping back” in awesome fashion. We can see it in nature, and now we can see it through the actions of billions of computers in global markets.
So the question begs….can we see it in ourselves?
A quick snapshot of the Dow 30:
Let’s say the 200 Day Moving Average (where it stands) is a long shot as…….it pretty much goes without saying – Central Banks will “once again” look to extended the party to the best of their abilities but…. also consider “time”. CB’ are powerless to this volume of selling.
If/when this intermediate ( and possibly “yearly’ ) decline in equities world wide picks up steam ( hmmm…..1000 points shaved off in just a single day? ) it could easily take months AND MONTHS for price and time to finally converge at the 200 DMA.
Maybe somewhere around 25,000 by June? July? This seems very reasonable, and considering the circumstances possibly a little too optimistic but….you know me. Realism right? No negativity here….just plain ol technical analysis and a decent handle on the fundamentals.
With all major areas of support now broken and the corona virus essentially putting the worlds manufacturing engine to sleep for a full 2 months now, it doesn’t take a rocket scientist to plot the trajectory.
Why would central banks look to “buy into this”? – Exactly…..they won’t.
Supply chain disruptions and grossly lagging profit projections and earnings will only “start” reporting late March, and we KNOW Apple for example has already guided down / will miss.
THIS WILL GO FOR NEARLY EVERY SINGLE COMPANY KNOWN TO MANKIND….as corona provides the catalyst for global selling.
Finally a REAL REASON The Fed can pin this on. The great escape began last Thursday, and the door got jammed open yesterday. The computers can run faster than you.
DO NOT EVEN CONSIDER BUYING THE DIP.
This is not a dip. This is a black hole.