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What 40 Years of Data Say After a 9% Nasdaq Drop
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ticker lesson
Breakdown
0:00lesson
NASDAQ decline analysis
- NASDAQ down 9% from October high
- Selling accelerates due to earnings reconsideration
- AI spending skepticism
- Historical 9% correction analysis
- Additional downside risk
1:53lesson
Historical NASDAQ 9% correction data
- 100 historical instances of 9% decline
- 52163 trading days analyzed
- 5% decline frequency in following month
- Path of recovery as important as return
- Constructive outlook but higher risk
3:46lesson
3-month returns vs. crisis vs. non-crisis
- 3-month average return 3.58%
- Median return 7.71%
- Crisis vs. non-crisis performance
- 45.8% crisis 3-month positive
- 80% non-crisis 3-month positive
5:50lesson
Crisis period correction examples
- 59 crisis correction signals
- 41 non-crisis signals
- Negative 0.59% one-week return in crisis
- Negative 1.75% one-month return in crisis
- Negative 0.32% three-month return in crisis
7:45lesson
Credit markets and NASDAQ correlation
- Credit markets down with NASDAQ
- Credit not weaker than expected in crisis
- Deja vu recovery pattern
- JNK and HYG down
- Credit turning lower
9:44lesson
Historical crisis examples
- Dotcom collapse 3-month return -6.3%
- 2008 crisis 3-month return -2.92%
- 2020 COVID 3-month return +6.3%
- Russia LTCM crisis 3-month return +32.6%
- 2022 inflation-driven sell-off 3-month return -1.58%
11:46lesson
Risk of further 5% decline
- 47% chance of another 5% decline within 1 month
- Cumulative drawdown 13.6%
- 67.8% chance in crisis
- 17.1% chance outside crisis
- Buyer beware in crisis
13:27lesson
Trading strategy in current market
- Avoid buying dips in current environment
- Short iron condor position in ES
- 6-month high/low halfway point
- 200-day moving average above swing highs
- Potential 350-400 point decline
15:14lesson
Market outlook and position management
- Position for 5% decline
- Short call spread at 7975-8000
- Short put spread at 7250-7275
- Position cost $8.40
- Exit at 420 or below
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