Fintech executive, writer, math geek, and investment systems developer. Founder and CEO of Altruist and Founder of FormulaFolios.

How Big Will the Next Market Drop be?

How Big Will the Next Market Drop be?

I'm working on a pretty in depth review of the current market rally, including some forecasts for the rest of the year.  Hopefully that post will be complete over the weekend.  Until then, I thought I'd at least provide a primer on the current market trend. Below, you'll find a S&P 500 chart that shows the "channel" stocks have been moving in as of late.  As you will see, it's been a pretty good run.

However, the market has been getting overbought for a couple weeks.  I suspect, at minimum, a pull back is due.

Stock Market Drop 2013

Stock Market Drop 2013

The blue dashed line at the far right shows how far the market could fall and still remain in its current channel.  About 3%.  That would be completely normal, and if it doesn't happen soon, it will happen eventually.  Hopefully when that happens the market will rebound, and head back toward the top of the rising channel.

This isn't a sky-is-falling cry, just a warning.  So long as the channel holds, good times are ahead.  If/when it fails (it will fail eventually), the next stop on the way down is around 1,472.  Until then, let the good time roll, but be prepared!

More to come soon,

Jason Wenk

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