Since late 1990, this has only occurred 3 times: Dec 2000, the 1st week of Feb 2008 and Feb 1st 2016. Obviously, the previous 2 bearish alignments preceded bear markets and the corresponding bullish alignments presaged years of bull markets. The current bearish alignment also occurred in October 1990 and January 1988. The 1988, 1990, 2000 and 2008 cases all did the following:
1. occurred in about a 4-month period of the calendar
2. were part of 1-3 week rallies to much lower highs
3. turned down within 1 day to 1 week after aligning bearish
4. subsequently dropped for 6, 2, 1 and 2 weeks approximately 8-10% in all 4 cases with 3 of 4 new lows (CY1987 exception)
5. then rallied for 5+ weeks after that with 2 moving into bull markets and 2 into bear markets
The weekly 200SMA was trending bullish below price in all 4 cases. And, it served as support at least briefly. The weekly 200SMA is currently SPX 1788.
If the pattern continues (albeit a very limited sample set), SPX should top this week with an 8%+ drop likely within 2 weeks (Feb 19 OPEX?). Of course, CY2008 took 6 weeks to fall 10% with an initial 1-week drop of 6%. An 8-10% drop from ~SPX 1950 would land at 1750-1800. SPX 1750ish has been on my radar for technical confluence for a long time, so that sounds very plausible. Of course, we can't forget point #5 above which suggests a crash won't happen, but the setup will be there on any 1-4 day 25-50% retracement from SPX 1750-1800.
Having said all that, we don't even have a daily or weekly bearish reversal yet based on a 1-candle swing technique. SPX would need to drop below SPX 1920 and 1873 respectively with certain other conditions. However, 2+ candle systems, bearish moving average alignment and relief of many oversold indicators paint a different picture. Last week's crash setup was averted, but risk is still very high. Good fortune.
No comments:
Post a Comment