The Bounce In October 2014 Is Officially The Fastest And Strongest In Past 100 Years
By Lawrence
The super bounce we’ve experienced in the stock market over the past 2 weeks is not only the fastest but also the strongest.
Here is what happened the past 6 weeks with S&P500.
Historical the next strongest bounce was Oct 2011. Here is the chart.
What happened back in Oct 11th, 2011 that stopped the drop?
Central bank actions of course. It was the day ECB and IMF announced their plans in dealing with Greece’s financial crisis.
It is similar to what happened in 2014 in the sense that some market players are obviously tipped off that central bank intervention was coming. Hence the outrageous buying strength. But due to the nature of the buying being a temporary measure, central banks have to unload their intervention inventories shortly after as witnessed on the chart above.
The ability for S&P to hold up this time will heavily depends on the maximum capacity of the central bankers in holding onto their inventories for as long as possible. If history repeats like what we see here back in year 2011, we will get another flush back down to 50% of the bounce quite soon. Only if actual market participants start to join the long side that S&P can get a modest year end rally. If long term players are not interested in taking over the central bankers’ inventory, there will be no year end rally and a prolonged correction going well into first quarter of 2015 is likely.
The Bounce In October 2014 Is Officially The Fastest And Strongest In Past 100 Years
The super bounce we’ve experienced in the stock market over the past 2 weeks is not only the fastest but also the strongest.
Here is what happened the past 6 weeks with S&P500.
Historical the next strongest bounce was Oct 2011. Here is the chart.
What happened back in Oct 11th, 2011 that stopped the drop?
Central bank actions of course. It was the day ECB and IMF announced their plans in dealing with Greece’s financial crisis.
It is similar to what happened in 2014 in the sense that some market players are obviously tipped off that central bank intervention was coming. Hence the outrageous buying strength. But due to the nature of the buying being a temporary measure, central banks have to unload their intervention inventories shortly after as witnessed on the chart above.
The ability for S&P to hold up this time will heavily depends on the maximum capacity of the central bankers in holding onto their inventories for as long as possible. If history repeats like what we see here back in year 2011, we will get another flush back down to 50% of the bounce quite soon. Only if actual market participants start to join the long side that S&P can get a modest year end rally. If long term players are not interested in taking over the central bankers’ inventory, there will be no year end rally and a prolonged correction going well into first quarter of 2015 is likely.
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