Last week I illustrated how eerily
close 2022 is tracking 1970. This disturbing comparison is not abating. Two
other comparable bear market years have also come to light. 1962 and 1974: both
midterm years with similar chart patterns.
1962 had the Cold War machinations and the Cuban Missile Crisis,
but rates, inflation and oil prices were nothing like 2022. 1974 on the other
hand had it all. Q1 GDP was negative, inflation surged, Oil Crisis and war in
1960 was removed since it held the March low until September
and was an election year. We also looked at 1969 and 1994 which have some similarities
and have been bandied about over the transom. But 1969 was not down in April
and flat the first four months. Though 1994 was a midterm year it was flat not
down like 2022 with a low in March.
We still expect a classic midterm bottom over the next
several months. Where it bottoms is anyone’s guess. We have ours. But we are reminded
of an old sign we used to have in the office about picking downside targets. It
said one thing, don’t do it.
Coming into this week NASDAQ had recorded five straight
weekly losses. As of Friday’s close, NASDAQ has declined 14.8% during the
current losing streak. Since 1971, NASDAQ has logged 28 previous weekly losing streaks
that lasted at least five weeks. The last such streak was in October and
November of 2012. During that six-week streak NASDAQ shed 9%. NASDAQ’s longest
weekly losing streak lasted 10 weeks in Q4 of 1973 and declined 21.5%. The
worst weekly streak by percent loss was seven weeks in Q1 of 2001 and 32.0%.
Of the previous 28 weekly losing streaks, 14 ended after
five weeks, nine came to an end after six weeks, four lasted seven weeks and
one lasted 10 weeks. Based upon the previous 28 streaks, NASDAQ had a 50/50
chance of extending the streak at the start of this week. Today’s decline is
skewing the odds toward more likely a sixth week.
In the above chart, the 30 trading days before
and the 60 trading days (approximately 3 calendar months) after the weekly
losing streak ended have been plotted. As expected, on average the longer the
streak the deeper the losses. Of note is the general lack of any substantial
rebound after the streak ended.