How Similar To 1929 Is This Market?


Simpler Trading Team

Apr 08th 2020  .  2 min read

Market news looks bright with the Dow up more than 28% from March lows, and the other indexes are up more than 20%.

So why is their caution at Simpler Trading?

The current rally cycle is strikingly similar to 1929 when the Dow recovered almost 50% over six months before cratering again. The recovery took years through the Great Depression.

A thought at Simpler Trading is the current market environment is a similar experience, just more compressed.

Uncertainty in the market today means gone are the steady days of following a trade setup, yawning, and waiting for the setup to show a gain. Today it’s more likely something striking will happen, and sooner than later.

Markets are closed Friday which adds tension for traders adjusting for the short week.

There are also several unknowns to consider in the next few weeks:

  • More than 30% of U.S. residential tenants didn’t pay rent the first week of April, a multi-billion dollar issue – what will May and June look like?
  • GDP is expected to drop by 20% or more in the second quarter under the crushing weight of an “all stop” to the economy – how long before GDP stabilizes?
  • As the economy recovers, will months of supposed consumer “pent up demand” help businesses – will consumers jump back into spending or ease into purchases over months or years?

This market uncertainty can present opportunities for traders who stay nimble… and keep a hand on their wallet by maintaining a strong cash position.

The key is to focus on finding setups… no matter the market direction. And, be able to handle the speed at which market changes will occur.

We Saw: markets rallying all day – 

  • Political and stimulus news creating market emotion
  • Larger investors still hesitant about immediate upside
  • Oil catching an upswing into the close

We’re Watching: … our wallets and searching for trade targets –

  • Can people and businesses continue paying rent and mortgages?
  • How bad will GDP fall in the second quarter?
  • Will consumer “pent up demand” create a fast, strong recovery?