Six Extreme April Charts and What Could Lie Ahead

Volatility and uncertainty have lead the way, with selloffs and deep dips the result. This action could be remembered for years to come.

Six Extreme Charts and What Could Lie Ahead

So, I want to take the time today to show you six extreme charts and what could lie ahead.

Some traders probably like this type of volatility. It offers a regular stream of opportunities on which they may be able to capitalize.

Long-term investors are likely not so fond of these wild gyrations. But I implore you long-termers: look past today for what could be a better future.

But first, let’s recognize the big drop that happened over two days:

Nearly 11% in two days!

Next, let’s seek some perspective. Using the exchange-traded fund SPDR S&P 500 ETF Trust (SPY) as a proxy, here’s what occurs after the index falls 5% or more in a day and 10% or more in a two-day period:

Six months later, on average, the market gained double digits. And two years later tends to bring nearly 40% returns.

Also, days of 10% or more losses are rare (they’re listed above). Look at the forward returns.

How does all this stack up to history? April carnage has been on par with some of the biggest moments of capitulation in recent times:

Those deep red bars are de-risking to the extreme. These huge drawdowns can be made worse by the unwinding of leveraged positions.

Let’s look at how such selloffs affect stocks.

Again, these events have only occurred during the most trying of times for those in the market. So, perhaps it’s not surprising to see huge forward gains after Big Money has finished selling.

But what might be surprising is how small- and mid-cap stocks soar (iShares Core S&P Mid-Cap ETF (IJH) represents mid-cap stocks, iShares Core S&P Small-Cap ETF (IJR) represents small-cap stocks). They rise even higher than the overall market:

For those who hang in there, the gains tend to appear.

But that isn’t easy, especially now. The volatility has been historic.

The CBOE Volatility Index (VIX) hit 40 for the first time since 2020:

VIX is often called the market’s “fear gauge” because it fluctuates based on near-term sentiment. When it spikes, anxiety is high.

So, you may not believe what’s next. See, when VIX spikes, it’s great for stocks…eventually.

Since 1990, VIX has hit 40 or more 203 times. The returns after one and two years are not only fantastic, but they also have incredibly high win rates:

It’s true with SPY and the Nasdaq 100, as represented by the Invesco QQQ Trust ETF (QQQ), which isn’t far from doubling, on average, in two years.

Understand Today’s Data

Shares of great companies continue to be hit hard. Indexes have plummeted. Pain is the story.

But with data as a guide, we can see how brighter days have taken hold after times of huge volatility in the past.

For those brave enough to handle the “blood in the streets” right now, history suggests big gains lie ahead. With a MAP as a guide, you can understand today’s data to win big in the market down the road.

If you’re a serious investor, Registered Investment Advisor (RIA), or a money manager looking for hedge-fund quality research, get started with a MAP PRO subscription today.