We are still in year 10 of a classic 16-18 year secular bear phase; last we looked, the S&P 500 is still in the hole by 27% over the past decade.
Historically, during a bear market or a corrective phase for that matter, the S&P 500 bottoms 24% below the 200-day m.a. — on average that is the best buying opportunity. As of today, that would mean 840.
We have updated our proprietary fair-value equity models and they are telling us that we are basically back to median fair-value models. However, market bottoms occur when we get 16% below fair-value ... that is the ideal buying opportunity. At this point, that would mean 900 on the S&P 500.
…We break below those levels [S&P 1040] and this market is going a lot lower. We have already broken below the flash-crash low of 1,065 back on May 6 — that day everybody was excited that as bad as it was, we established a new floor. Well, below 1,040, the new low is probably anywhere from 840 to 900.
Investor sentiment has come back to reality…At the nearby peak, the bull share was sitting at 49%; it has since declined to 37%, but again, at true market bottoms, this number is sitting at 20% on the nose.
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