This week marks the first anniversary of the start of the bear market decline that sent stock markets including the S&P 500 Index tumbling 35.41% in approximately a month. The 2020 bear market decline was triggered by the COVID-19 pandemic spreading across the world and shutting down global economies. Because of the speed at which the pandemic spread and the broadness of the global shutdowns last year, it was one of the fastest bear market decline in history. Although stocks have recovered from last year's sell-off, the progress or setbacks related to the COVID-19 pandemic continue to be on the minds of many investors.
There is a lot of hope and expectation that the vaccine rollout and the high vaccine efficacy will lead to a sustainable economic recovery. Many expect life will gradually return to some form of normalcy later in the year. The key to our future well-being and the health of the economy is to get the pandemic under control, vaccinating as many people as possible, and returning people to work.
It has certainly not been boring this year. Markets kicked off the new year with fresh new all-time highs. The buying frenzy then spread to cryptocurrencies, EVs, SPACs, among others. The disruptive power of day trading was in full display, as evidenced by the buzz surrounding an obscure video game retailer (GameStop) and a troubled movie theatre chain (AMC Entertainment Holdings).
In the past week or so, some market pundits are warning of another bear market decline. Although the speculative runups in pockets of areas in the marketplace do not necessarily imply a speculative bubble burst for the broad stock market, the 2020 COVID-19 stock market crash taught us to be vigilant and be proactive.
Enclosed below are short-term SPX charts of the months leading to the 2020 COVID-10 market crash and the market action over the past several months. Note the striking similarities, namely the well-defined accelerated uptrend channel patterns in the two timeframes. Remember, the trend is your friend until it ends. The prevailing and dominant trend (uptrend channel) is likely to continue until a trend reversal occurs.
Attached below are the SPX Index (SPX) pre-2020 COVID-19 from October 2019 to March 2020 and today's market conditions from October 2020 to the present. As they say - history does not always repeat itself exactly, but it sometimes rhymes. As memory fades, events from the past and technical conditions of the prior cycle can become events of the present.