As the stock market bounces sharply over the last few days, many investors are wondering if the worst is over. The answer is likely no. This bounce is based on massive money printing as well as the hope that Trump can somehow open the economy in 14 days. That will not happen. Cases may not even have peaked in 14 days, let alone started to go lower. In fact, experts expect there to be as much of a year of social distancing required, perhaps more.
There is a worst case scenario for the S&P and investors should pay attention. The government can only print so much money and send so much in stimulus checks before it becomes insolvent. The Federal Reserve is in the same boat. The longer business suffers, the more likely corporate debt creates a major credit crisis. In fact, the Federal Reserve has already been putting out fires everywhere in the credit markets. The system has so much debt in it, from individual to corporations, all the way to governments, it may totally collapse in the worst case scenario for the S&P.
If this happens, at a minimum the S&P (SPY) will trade down to its 2007 highs. This 2007 high was a double top from the 2000 high. Resistance (double top) now becomes epic support. The price point at this key level is $155.00 on the SPY (tracking ETF for the S&P). That means from the current level, there is as much as another 47% downside in the market.
However, there is AMAZING news. Swing traders like us will make fortunes during the ups/downs of these moves. Just like I made a killing over the last month, there will be at least a year of insanity to bank millions on. The key is to be nimble, quick and buy key levels, and sell into resistance. Learn and profit. That is the way to turn this epic collapse into a defining moment in your financial career.
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