CBOE Volatility or Pain/Panic Index currently 36 Buy between 40 and 45 based on the
historical figures below:
The Vix reached high of 40 in 2002 Recession (24 percent S&P loss)
The vix reached high of 45 in 1998 Recession (28 percent S&P loss)
However...beware that VIX reached much loftier heights such as
The vix reached high of 150 in 1987 crash (24 percent S&P loss
in a much shorter period of time)
1932 Stock Market Crash:
This is the grand daddy of them all. Investors lost 86% of their money over this 813 day beast.
This market crash combined with the 1929 crash, makes up the great depression.
If you had $1000 on 9/3/1929 (beginning of the 4th worst crash, it would have gone down to a
whopping $108.14 by July 8th, 1932 (end of the worst crash) or an 89.2% loss. To recover from
a loss like that, you would have to watch your portfolio go up 825%! The full recovery didn't
take place until 1954, 22 years later!
Worst Stock Market Crash Ever:
Date Started: 4/17/1930
Date Ended: 7/8/1932
Total Days: 813
Starting DJIA: 294.07
Ending DJIA: 41.22
Total Loss: -86.0%
Good signs...a since of dire markets conditions and mauling bear consensus appears to be a reverse
signal for possible short term bounce. Short term bounce is likely within 1-2 market days????
Bad signs...FED ask for more money to be raised to help in keeping markets stable. Buyouts and
bailouts have continue to draw down the federal reserves capital. A sense that more bailouts
on the way.
Bad...More banks appear to be in trouble and expanding to all aspects of the banking and insurance
industries.
Bad...Downward momentum in the financial banking structure is accelerating and panic selling is
increasing.
I've been in the S&P for over 19 years...this bank situation is getting really scary. However...
greed is powerful and bank P/E are now around 12-15 compared to January 2008 P/E of 22.
Even though the value of bank assets currently undergoing scrutiny, historically bank P/E 's are now
getting to their 10-year average. The only cheap banks appear to be the Regional Banks with current
P/E of around 7.5. Otherwise...appears bigger banks could still see some downside from current 12-15
down to my horror estimates around 9-10.
So, with all this knowledge in hand, I would rate the short term, a decent buy on oversold conditions, but some downside risk is
still evident in the financial sector which will carryover to other financial limbs.
In recessions like this one, we could see a 4-7 percent bounce. I would have given more but the outlook is so cloudy. I don't see
anything higher. What do ya'll think? I'm thinking about getting in on Thursday. I might miss a rally on Thursday but I see a two day rally.
Looking for a magic ball to give me an answer. I'll accept any help to change my mind.
S&P 1150 appears to be good for my health. If it holds...look for a two day rally.
