Transcript:
Tom Vaughan:
So this week, I really saw amazing things happen. I mean, the the key thing that I think is most incredible is number one is of the five days this week, we hit a new all time high, for example, on the S&P 500 for the five days, including today. And so it’s, it’s just an amazing market. And let me share his chart with you. And I’ll try to try to describe what I see.
So this is this is a chart, I’ll tell you what’s in this chart first, this is the S&P 500 for the last two years. And you can see here, these little, you know, red and green boxes, these are candlestick chart. Those are, you know, days for each one of those. And then this blue line is very important to me, this is the 200 day moving average. And so each point on this line is the average of 200 previous days. And so a couple of things that you want to note here that I think are important and more that you can learn about these types of things, the better investor you can be. So first of all, this downturn that we had, you know, back up top here was February 19, the bottom was the 23rd of March, that very short time period, basically almost a month, a little bit more than a month, the S&P 500 dropped 35%. So that’s the fastest drop of 35% in history. And one of the things I think that does confuse people in total is oh, you know, these downturns are usually caused by recessions and economic issues that are happening, there was some slowing, you know, economic issue happening here in 2019. But nothing really approaching recession yet. This is actually a shutdown from a virus that then caused a recession, which was one of the shortest recessions in history, it was only to two months, two quarters, sorry. But several things happened, we’ve had this unbelievable recovery that has happened. And all along here.
Keep in mind, there have been people that are saying the markets gonna crash, the markets gonna crash, the markets gonna crash. And we just had some huge things happen. Number one, right. In this timeframe, here, we had the best 50 days in the history of the stock market. And from the bottom up to where we are now, we had the fastest doubling of the market in that timeframe. So went over 100% faster than it’s ever gone before. Here, from the end of October till now, we’ve now had 205 trading days, without at least a 5% downturn, there’s only seven of those that have happened that are longer, the longest one is 404 days. So it can still go longer. But it’s very incredible what’s happening here. And so the pattern here is very unusual. And people are worried about, Hey, you know, the stock market’s going to crash, it’s going too high, it’s going too long. Well, I got to look at the pattern a little bit before you decide on what’s going to happen there. Number one is the 200. day moving average is very nicely sloped upward. I mean, that is incredible. And the price is well above the 200 day moving average, which means the price is still accelerating at an even faster pace. So for example, the 200 day average right now is 4039. And it’s at 4500. So it’s it’s way up there, it’s doing really well, it’s got some room to give back if it needs to. But let me show you what the tops look like in the last two big downturn. So the 2000 downturn, which is the third biggest downturn in history in the 2008 downturn, which is the second biggest downturn.
So here’s what 2000 looks like, a completely different top compared to where we are now. First of all, you can see there’s lots of, you know, 5% plus downturns happening here, very, very volatile, S&P 500 is trending upward, but the price keeps falling through the 200 day moving average 200 day moving average trading up or before it collapsed, right? Here’s the 2008 downturn smoother. But still, lots of little downturns and lots of incursions past the 200 day moving average before it collapsed. What happens when the price gets down parses 200, day moving average, what that tells you is that the momentum is slowing down. And so if you look at here we are again today, this is showing unbelievable momentum. And so my last point, and this is maybe really interesting, to me, at least, is the fact that I’ve not seen what was happening right now. And as much as I’m seeing now what I’m calling buy the dip, this concept of coming in, whenever the market does drop a little bit and buying. If you look at this year, you know, here’s a little dip, here’s a little dip. Here’s another one. One of the things you’ll notice, if you look closely, for the most part, they’re getting smaller, this last one just last week, you know, the Federal Reserve minutes came out, and they were talking about, you know, cutting back on the purchase of bond by the beginning of the bid by the end of this year. And the market sold off for a couple days and boom, money came in.
And so one of the things to keep in mind here and not to get too nervous about what’s going on is this by the dip concept is really driving this market. Now at some point in time that can change and we will watch for that. But at the moment that’s what’s working and So every time the market comes down a little bit, that’s not a bad thing. It kind of releases some pressure. But what it really does is it brings in these buy the dip people. And they come in and push it up to new high, which is exactly what happened. We know we had a little downturn last week. And then we end up with this new high, you know, by Monday and the new high on Tuesday, new high on Wednesday and Middle High today on Friday. So that’s kind of what I see really interesting timeframe. These things are unprecedented that I’m talking about, at least in my career, and my observations. This is a very unusual market, the basics are so strong, and be very careful about listening to too many people talking about how things are gonna fall apart, they will fall apart someday, but the basics haven’t changed at all. You know, the Delta Variant is coming up. It’s scary. It’s a health, you know, issue and what have you. But you see, the market is still marching forward. Because what we’ve seen so far from that is not massive economic slowdown, and you don’t think we’re going to shut down again, either. So, you know, that’s not going to happen. We’re gonna keep going. Interest rates are one of the key issues and we’re still at very low rates, and what have you. So anyway, that’s what I see happening right now. And I really look forward to kind of talk about this again next week and we’ll see where it goes from there.