Key level for S&P 500 is 2,793, which is 50% retrace of decline. 50% confirmed bottoms in 1987, 2002 and 2009. Remember market symmetry

An impressive rally has been underway for the past few days, bringing gains to +26% from the March 23, 2020 lows.  But given the uncertainty around the duration and magnitude of the economic fallout and inconclusive healthcare crisis visibility, it is natural for most of our clients to be wary.

So the question we would like to address, is what level does the S&P 500 need to reach to confirm a bottom is in place?

The simple way to answer this, is to look at the declines of 1987, 2002-2003 and 2008-2009 and ask, where did the "false bottom rally" fail?
- Nov 1987 failed at 33% retrace
- Sep 2002 failed at 33% retrace
- Dec 2008 failed at 24% retrace

The upper threshold is a 33% retrace.

In the current S&P 500 today, 33% ~2,600.  24% is 2,475. The S&P is at 2,712.98

- So the S&P 500 has moved beyond the upper ranges of the crashes of 1987, 2002-2003 and 2008-2009.


Figure: 2020 S&P 500 plus the retrace rallies of other failed bottoms marked.

POINT #1: 50% retrace is conclusive of the bottom is in...But how do we know if the bottom is actually in?  We think the simplest rule of thumb is retracing 50% of the losses.  Below, we show when the 50% retrace was reached:

- Post 1987, it was Sept 1988
- Post 2002, it was Dec 2003
- Post 2008, it was Dec 2009

Notice the pattern?

Well into recovery, a 50% retrace confirms the low.  Thus, the S&P 500 2,793 is a key level.  That is ~100 points above here.  So we have not breached that level.


Figure: 1987 bottom, failed rally and confirmed recovery

checkout-thomas-lee image
checkout-logo image

Become a Member To Access FS Insight Research

FS Insight gives individual investors access to Tom Lee's research, previously only available to banks and hedge funds.

Monthly

$199/mo

Includes 30-Day Free Trial

Join Now

Annual

-15% $2,028/yr

List Price: $2,388

Savings: $360

Join Now

What's included in your FSI Membership?

tom lee iamge

Thomas J. Lee

Head of Research

Type Publication Mon Tue Wed Thu Fri Monthly
Reports First Word
The best market research out there -- on a near-daily basis.
Intraday Alerts
These are released periodically after crucial market developments.
Real-Time
Weekly Roadmap
Weekly summary of market events and updates on our key theses.
Webinars & Videos Macro Minute Video
Daily video commentary on market conditions & key events.
Outlook Webinars
We host over 12 LIVE webinars per year with our research team and high-profile special guests. Incredible value and market insights!
Yearly
Granny Shots Webinars
CEO Interview Webinars Quarterly
Appearances Archive Real-Time
Allocation Tools "Super Granny" Shots Stock List
Granny Shots we expect to tactically outperform and underperform.
Granny Shots Stock List
Thematic investment stock picks that aim to outperform the S&P 500.
Sector Allocation
A sector allocation strategy that is designed to outperform the S&P 500 while taking minimal risk.
Market Alerts ⚡️FlashInsights
Real-time market commentary about macro and crypto events from our research heads.
Real-Time
tom lee iamge

Mark L. Newton

Head of Technical Strategy

Type Publication Mon Tue Wed Thu Fri Monthly
Reports Daily Technical Strategy
Daily commentary on market trends and short term opportunities.
Weekly Roadmap
Weekly summary of market events and updates on our key theses.
Webinars & Videos Daily Technical Strategy
Daily commentary on market trends and short term opportunities.
Live Technical Analysis
Outlook Webinars
We host over 12 LIVE webinars per year with our research team and high-profile special guests. Incredible value and market insights!
Yearly
Appearances Archive Real-Time
Allocation Tools Newton's Upticks Stock List
Technically derived, intermediate-term picks of attractive risk/reward opportunities from the S&P 500.
Market Alerts ⚡️FlashInsights
Real-time market commentary about macro and crypto events from our research heads.
tom lee iamge

L. Thomas Block

Washington Policy Strategy

Type Publication Mon Tue Wed Thu Fri Monthly
Reports US Policy
Weekly update on developments in Washington DC and how they may impact Wall Street.
Weekly Roadmap
Weekly summary of market events and updates on our key theses.
Market Alerts ⚡️FlashInsights
Real-time market commentary about macro and crypto events from our research heads.
Real-Time
sean farrell Crypto Team

Sean Farrell & Crypto Team

Type Publication Mon Tue Wed Thu Fri Monthly
Reports Market Update
Stay on top of the crypto markets with macro commentary, technical analysis, and the most relevant news.
Weekly Strategy
Weekly summary of market events and updates on our key theses.
Funding Fridays
Are you looking for investment opportunities in the crypto space? We explore early-stage crypto opportunities in this note about where the smart money is being invested!
Crypto Concepts
We periodically provide in-depth research on the leading protocols, companies, and funds shaping the crypto ecosystem.
Liquid Ventures
A recurring research note focused on delivering unique insights into high-risk investment opportunities within the crypto ecosystem, primarily centered on early-stage or small-cap tokens.
Deep Research
We periodically provide in-depth research on the leading protocols, companies, and funds shaping the crypto ecosystem.
Quarterly
Weekly Roadmap
Weekly summary of market events and updates on our key theses.
Webinars & Videos Outlook Webinars
Ongoing webinars exploring crypto opportunities, in depth research, and exclusive research offerings from our team of analysts and leading cryptocurrency firms.
Yearly
Crypto Comments Daily Technical Strategy
From Bitcoin, Ethereum and Solana to other coins, our Head of Technical Strategy highlights important price movement to help give you an edge.
Allocation Tools Crypto Core Strategy
A powerful tool designed to help crypto investors build a crypto portfolio that outperforms the industry’s king – bitcoin – regardless of market conditions.
Market Alerts ⚡️FlashInsights
Real-time market commentary about macro and crypto events from our research heads.
Real-Time
Crypto Team

FS Insight Research Team

Type Publication Mon Tue Wed Thu Fri Monthly
Reports First to Market
*Earnings Daily
This note provides investors with a myriad of useful metrics to measure the progress of earnings season
Signal From Noise
Highlights timely market themes and sectors with corresponding stocks, cutting through the day-to-day market “noise” for a distinct perspective.
Community Questions
We gather your inquiries and answer them in the most scalable way. Hear directly from our research principals!
FS Insight Academy
Our main goal is to make you a better investor! This series will guide you through key financial concepts and topics in an understandable way.
Webinars & Videos Free Macro Webinars
Live webinars and Q&A with our research team and high-profile industry leaders.
Quarterly
Free Crypto Webinars
Live webinars and Q&A with our research team and high-profile industry leaders.
Quarterly

*Daily reporting during each quarterly earnings season.

More from the author

Disclosures (show)

Get invaluable analysis of the market and stocks. Cancel at any time. Start Free Trial

Articles Read 2/2

🎁 Unlock 1 extra article by joining our Community!

You are reading the last free article for this month.

By continuing, you agree to the Terms of Service and Privacy Policy.

Already have an account? Sign In

Don't Miss Out
First Month Free

Trending tickers in our research

Get invaluable analysis of the market and stocks. Cancel at any time. Start Free Trial

Articles Read 2/2

🎁 Unlock 1 extra article by joining our Community!

You are reading the last free article for this month.

By continuing, you agree to the Terms of Service and Privacy Policy.

Already have an account? Sign In