U.S. S&P 500 Stock Market to Stagnate for Five Years in Secular Bear Market

The U.S. Stock Market, as represented by the S&P 500 Index, could stagnate for a long time period (such as five years).

Long Term S&P 500 Price Channel Since 1950



Since 1950, the S&P 500 Stock Market has been in a consistent price channel, until the year 1995, when the S&P 500 starts the runup at an unsustainable rate, until the peak in 2000. During the time period starting in 1995, the S&P 500 has gone above the long term Price Channel.

We are just starting to see the S&P 500 get back to the top of the normal long term price channel.

In the Reversion to the Mean Theory, this means that the S&P 500 will have to trade sideways for some time to remain consistently in the channel.

Based on the lines above, the S&P 500 should be trading around the level of 500 to 1200.

Five years from now, the S&P 500 could be trading from the 600 to 1500 level, to remain within the long term price channel.

We are in middle of 17 Year Secular Bear Market

Over the long term, the U.S. Stock Market Appears to be in Bull Markets or Bear Markets (Secular Bull Market and Secular Bear Market) for an average of 16 to 17 years.

One grouping consists of:

1. 1906-1921: Secular BEAR Market
   
2. 1922-1928: Secular BULL Market
   
3. 1929-1949: Secular BEAR Market
   
4. 1950-1965: Secular BULL Market
   
5. 1966-1982: Secular BEAR Market
   
6. 1983-1999: Secular BULL Market
   
7. 2000-????: Secular BEAR Market
   

This means that if the current Secular Bear Market started in 2000, and if the average Secular Market consists of 16 to 17 year time periods, then a new Secular Bull may start around the year 2016 or 2017, consistent with the Price Channel Behavior above.

More Details on Secular Bull and Bear Markets including Charts

Today's S&P 500 Chart

Reversion to the Mean Trade on SRS: Double Short Real Estate ETF?

In the Previous Post, this blog speculated how far this rally could go.

The S&P 500 rally does appear to be stalling, after being severely underneath the 50 day and 200 day moving average. Over the last several months, the S&P 500 has broken above the 50 day moving average, and approached the 200 day moving average (200 Day Moving average was approximately 950, and the S&P 500 reached 930).

Now as we look at several sector ETFs (Exchange Traded Funds), we notice that some are severely underneath the 50 and 200 day moving average.



The SRS ETF, the Proshares Double Short Real Estate ETF, is currently at 24.56. The 50 Day Moving Average is currently at 44.73 and the 200 Day Moving Average is 77.82.

This means that currently, SRS (a very volatile ETF), is 45% below the 50 day moving average and 68% below the 200 day moving average. These are very large percentages below the moving averages.

Maybe it is time for the reversion to mean trade on some ETFs such as the SRS?