Submitted by John Hardy of Saxo Bank,
Now that I am convinced we’ve moved into totally unjustifiable extremes of complacency in risky assets, I am having a look at some historic stock market breaks and how they have unfolded. In that light, the current setup is rather ominous.
Note: All charts are courtesy of Bloomberg – kudos to them for keeping such long data sets on the major US market indices.
Disclaimer: I’m an FX strategist and not an equity strategist. But I also fancy myself as a bit of a chartist and I like to look at historic patterns, particularly when the past might provide a historic parallel for the present situation. In this case, I’m interested in what many historic major equity chart tops look like in a technical sense now that if feels like we’ve entered into a blow-off territory technically. Somewhat to my surprise, I found that many major market tops had remarkably similar traits as the one we have just posted.
What is in this post?
A look at big stock market tops in the S&P500 that resemble the current situation (with the assumption that the current situation risks proving a major top), including the all-time classic 1929, but also 1969, 1973, and 1987. The resemblance is not only technical, but also due to the fact that in all instances, bond yields were rising.
Read more about this... here.