Could the S&P 500 really fall 20%?

TL;DR

The analyst maintains a bearish outlook for the general stock market based on the S&P chart, which shows the market topping out and a potential significant decline ahead.

Transcript

hello it's john burford with chart of the week for monday the 21st of february and i'm covering the general stock market basically because i am maintaining my bearish posture which i've had since november this is the weekly s p chart which is the probably the most um generally watched us index and it's come off the low here at the corona crash low ... Read More

Key Insights

• 🫥 The S&P chart shows all the market highs on a straight line, indicating a potential top-out and significant decline.
• 🫥 Parallel lines to significant lines on the chart can also be meaningful, suggesting a long and strong wave three decline in the market.
• 🙈 Tesla's decline from its all-time high is seen as a reflection of overall risk-off sentiment in the market.
• ✋ The analyst believes a new high above the November high is an extremely unlikely outcome.
• 🎯 The initial target for the market's decline is around the 3500 area.
• 👋 Despite potential market volatility, the analyst expects the decline to make good progress.
• 🇺🇦 The analyst acknowledges geopolitical shenanigans, such as those happening in Ukraine, but believes they will not hinder the market's decline.

Questions & Answers

Q: What is the basis for the analyst's bearish outlook on the general stock market?

The analyst's bearish outlook is based on the S&P chart, which shows all the highs on a straight line starting from a specific point. The market fell off this line in November, signaling a potential top-out and subsequent decline.

Q: What would change the analyst's mind about the market's direction?

The analyst's outlook would change if the market were to reverse and rally above the wave two high on the S&P chart. However, this outcome is considered highly unlikely, and the analyst believes a significant decline is more probable.

Q: How does the analyst propose protecting ourselves as investors?

The analyst does not provide specific strategies for protecting investments. However, based on the bearish outlook, investors may consider reducing exposure to stocks and increasing exposure to assets that tend to perform well in a declining market, such as bonds or defensive stocks.

Q: What is the importance of Tesla in determining the state of the overall market?

Tesla is seen as an indicator for the state of risk-on or risk-off sentiment in the markets. The analyst believes that Tesla's decline of 32% from its all-time high suggests a broader trend of risk-off sentiment in the market.

Summary & Key Takeaways

• The S&P weekly chart shows a significant rise from the corona crash low to the November high, but all the highs are on a straight line. The market fell off this line in November, indicating a potential top-out.

• Parallel lines to the significant straight lines on the chart can also be significant, suggesting a long and strong wave three decline in the market.

• Tesla, one of the darlings of the investment community, is also showing signs of heading lower based on a parallel line analysis.