S&P 500 Index at Inflection Points
Click to enlarge:




Note: If you were to use intraday peak and trough you get a number closer to 57% drop on S&P500 (recall the SPX 666 marker)

The chart showing % needed to recover losses and return to market peak after the jump . . .



This chart should be instructive for new investors and traders — the recovery from losses is not symmetrical:


Equity Scenarios: Bull, Bear & In Between

J.P Morgan Asset Management
Guide to the Markets
As of June 30, 2012

Category: Markets

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

9 Responses to “S&P 500 Index at Inflection Points”

  1. PeterR says:

    SPY double top with 2007, plus EMA(50) about to cross EMA(150)? These crosses do not happen very often. The similarities are uncanny IMO.

  2. 12x PE seems too low to be an inflection, which suggests that the E is way too high. Earnings (specifically % margins) have to revert to the mean eventually.

  3. nofoulsontheplayground says:

    It looks like there’s an average recovery rate of 48-months for a cyclical bear within a secular bear. That would work out to around January 2013 for a new all-time high on the S&P 500.

    This series starts in 1946, which means the data set is fairly small, and the secular bear sample is arguably too small to be of statistical use (only two samples, and one is still ongoing).

  4. perpetual_neophyte says:

    Someone help me understand how you are supposed to use forward P/E Ratio as a useful indicator of anything. At the 2007 peak, it was lower than the 1996 trough (“It can’t be a peak, look how low the fwd PE is!”) and the June 30, 2012 figure is higher than the 1996 _and_ 2002 troughs.

    I am seeing lower lows and lower highs for the forward P/E Ratio at the inflection points, but that’s about it.

  5. dead hobo says:

    My read on this is a little more common. The first two lines connected the bottoms to the tops via the tops along the way, more or less. The QE induced recovery connected the bottom to the top via the absolute bottoms along the way. This implies a reversion to mean which creates a big drop in the S&P once artificial stimulus is eliminated.

    Given the European Way, which calls for economic recovery from too much debt by loaning more to countries that can’t repay the original debt and never will, given the China Way that says you need 7.5% growth just to stay normal … ignoring the empty towns and empty malls and1000 years of civil servant corruption, and given the US way of borrowing money so rich people don’t pay taxes, I think really bad times are ahead in the equity markets … once reality is eventually reflected.

  6. Iamthe50percent says:

    Looks like we are headed for another 50% drop. Which is likely to gove us President Romney and a Tea Party Senate and House. I shudder to think what will happen then. A 100% stock market rise, yes, but also probably 33% unemployment with no Unemployment Compensation and massive mortgage defaults.

  7. billybob says:

    >A 100% stock market rise, yes, but also probably 33% unemployment with no Unemployment Compensation and massive mortgage defaults.

    Most likely followed by a refreshing of the tree of liberty with the blood of patriots and tyrants.

  8. TAN908 says:

    Would love to see this chart restated with PE/G (Long-Term SP500 EPS Growth) rather than PE ratios shown. Currently, it appears we are at a more rational PE valuation on the surface but my fear is with the large overhang including European distress, our national debt / govt spending, and likely increased taxes the growth forecast is likely much lower now than in the past 15 years so perhaps it would not be as rosy at it appears. Food for thought.