All of the major indexes were hammered today but have recovered some of their losses as of 1:00 PM Central. 

As I type now, at 1:50 Central stocks reversed lower.

Nasdaq Composite Index

(Click on image to enlarge)

Nasdaq Composite Index courtesy of Stockcharts.com.

The DOW

(Click on image to enlarge)

Dow Jones Industrial Index courtesy of Stockcharts.com.

There is now a vicious short-covering rally underway and stocks closing green would not surprise me in the least. 

Nor should anyone be surprised if stocks reverse back towards the lows. 

Let's step back and look at longer-term charts and the grand scheme of things.

S&P 500 Weekly

(Click on image to enlarge)

S&P 500 Weekly Chart courtesy of Stockcharts.com, annotated by Mish

A weekly chart shows stocks more than doubled from the pandemic low. 

It would take another 900 point plunge on the S&P 500 just to get back to the pre-pandemic high. 

Let's take an even broader view.

S&P 500 Monthly Chart

(Click on image to enlarge)

S&P 500 Monthly Chart courtesy of Stockcharts.com, annotated by Mish

The dashed lines show technical support levels. 

Many millennials and Zoomers have no idea what a strong bear market feels like. 

I believe we are headed for one courtesy of the Fed's cheap money coupled with three rounds of fiscal stimulus, one under President Trump and two under Biden. 

Yep, I have been a bear for a long time. But the Fed had other ideas pumping massive amounts of QE and holding rates too low too long just as it did the 2000 dotcom bubble followed by the 2007 housing bubble.

By every measure, this bubble is bigger and more encompassing than the previous two. 

A 40% decline from the tops is the bare minimum of what I expect. That's how insanely overvalued stocks are. 

If so, this plunge from the January highs is barely a down pay on what's coming.

Return-Free Risk

John Hussman has an excellent column this month called Return-Free Risk that I encourage everyone to read.

The question isn’t whether one should adapt to unprecedented Fed policies, but instead, the form those adaptations should take. We are fully convinced that these historic valuation extremes have removed decades of investment returns from the future, and strongly suspect that the Fed has amplified future downside risk as well. I believe investors have placed themselves in a position that is likely to be rewarded by a very long, interesting trip to nowhere over the coming 10-20 years. At worst, they may discover the hard way that a retreat merely to historically run-of-the-mill valuations really does imply a two-thirds loss in the S&P 500. 

In case you missed it, also see my January 21 post-S&P 500 Futures Positioning Suggests More Down is Coming. 

Well, here we are.

Despite the selloff, fund managers and speculators are still hugely long futures, even adding more.

Hussman is accused of being a perma-bear and so am I. What's true is that we seek to above bubbles and this one has been spectacular.

Yet, my 40% decline scenario (at least) make me look like a raging optimist compared to John.