- September 13, 2020
- Posted by: Tradingshot Articles
- Category: Uncategorized
S&P’s weakness in recent weeks has got many thinking that the rally since the March correction is over and that maybe a new round of selling is ahead of us. On such occasions I have found it extremely useful to consult very long-term time-frames (such as the 1M in this instance) and look how similar patterns traded in the past.
As you see on the current study, the current phase we are in resembles the post Black Monday (1987) price action (even though the recovery after the March COVID collapse has been quicker than that of Black Monday’s). What preceded the two events is also identical as displayed by the a-b-c-d sequence. After the (d) leg that breached the 1M MA200, a long term bullish cycle started that was interrupted violently by Black Monday. That is very similar to how S&P traded after the 2000 Dot Com crash and subprime collapse (a-b-c-d) leading to a long term bullish cycle that was violently cut by the COVID sell-off. The RSI and LMACD (as we are on the logarithmic scale) also print similar readings.
If history repeats itself, S&P is not ahead of another sell-off but instead has much greater probabilities of being at the very start of a new 10 year Bull Market! Do you agree with that?
Of course it has to be said that there was no pandemic back then nor catastrophic economy lockdowns. But it has to be said that catalysts in Economics may come in different shapes while having the exact same impact/ weight on the market and peoples’ psychology. After all it is psychology with fear and greed that is moving the stock markets.
So are you feel we are ahead of a new Bull Cycle or are you selling, expecting a new bearish hit? Feel free to share your work and let me know in the comments section!
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