"It's Time To Be Alert!"

Authored by Steven Vanelli via Knowledge Leaders Capital blog,

This is the time to be alert for any signs of a failure in the S&P 500. Why? There are two really good historical precedents to the current market configuration.

The set-up is as follows: stocks suffer a rather quick correction, bounce back, take out the previous lows and experience a waterfall decline. The period of time from the bounce-back high to a new low was seven days.

Let’s look at the 1929 crash to start. The S&P 500 peaked at 31.86 on September 16, 1929. Over the next 14 days, the index experienced a 10.08% correction. Then, over the next four days, stocks bounced back by 7.54%. What followed was a seven-day period of time where stocks drifted lower, and then on October 18, 1929 the low was broken and a waterfall decline ensued. The decline from October 8, 1929 to November 13, 1929 was a 22-day waterfall decline, with stocks dropping 42.68% into November 13, 1929.

The 1987 crash was a remarkably similar experience. Stocks peaked on August 25, 1987 and then began a 7.79% decline over 18 days. Stocks then rebounded by 5.65% over the following 10 days, peaking on October 5, 1987. Over the next seven days, the low failed and a waterfall decline followed. The decline was 28.51% over four days, culminating in a low on October 19, 1987.

In the last 40 days, we’ve seen the S&P 500 peak at 2872.87 on January 26. Stocks experienced a 10.16% correction over nine days, and then they bounced back by 7.96% over the next 20 days ending last Friday, March 9. We are now in that seven-day window where stocks need to hold up.

If, over the next seven days, we drift lower and take out the 2581 low of February 8, history suggests this is a set-up for a waterfall decline.

Through next Wednesday, it is time to be alert.

Comments

PrezTrump gatorengineer Tue, 03/13/2018 - 16:47 Permalink

gatorengineer, I remember telling you 2 or 3 years ago the game was to buy because the Fed and PPT and whatnot, but you clowns were still collecting pennies from the couch to fund your triple leveraged option shorts.

Do you actually like getting your ass reamed?

Do you not see what is coming here?

Look at how bullish all these newbie ZH clowns are !!!!! HAHAHAHAHA

In reply to by gatorengineer

gatorengineer Tue, 03/13/2018 - 15:57 Permalink

These guys just dont learn..... Powell has a press and he isnt afraid to use it.  We will hit ATHs before 2750.

Russia nuked London and it would be bullish

Iconoclast421 Tue, 03/13/2018 - 16:03 Permalink

If we take out 2581 I wouldnt describe that as a "drift lower". That move in itself would be hella ugly, let alone what comes after it. But lets face it, there is just too much goddam printed money floating around for this to happen. $28 billion just in US federal debt interest payments for last month alone. Where you think that money gonna go?

truthalwayswinsout Tue, 03/13/2018 - 16:35 Permalink

Stocks are not going to crash. All that tax money the corporations are saving is going into share buybacks which is offsetting the removal of liquidity by the fed. There are record amounts of share buy backs going on.

As the fed steps up is removal it will eventually exceed the buybacks and that is when the stock market will nose dive.

Honest Sam Tue, 03/13/2018 - 17:22 Permalink

Take this to the...erm.....bank:

This will not happen.  If would make me too happy and god in a rare pact with satan, has taken it upon herself to be certain----as death comes to us all, but Pelosi---that I should never be anything but in misery. 

My Triple SPX shorts won't pay off until at least 50 points are shaved of the S  & P.

Do what you will with this information but it is as real as Gartman remaining net short, and again a loser, before the close of last weeks options.

 

 

bobert727 Tue, 03/13/2018 - 18:09 Permalink

Not sure how you graphed the S&P 500 back in 1929 considering it didn't exist until 1957......

However, Standard & Poor’s, initially known as the Standard Statistics Company, created its first stock market index in 1923. It consisted of the stocks of 233 companies and was computed weekly.

Three years later, it developed a 90-stock composite price index computed daily. That was expanded over the years.

Perhaps that is what you graphed.

That said....your 1929 chart looks more like the DOW divided by 10.

The Dow peaked in the mid 300's and fell to the low 200's before a minor bounce.Three years later, mid 1932, it was below 50; having lost more than 85% from its peak.

But based on your chart of 1929....the decline would have eventually taken that index down near 6! Today, that would be like the Dow declining to 4000. Ouch!

 

analyser Tue, 03/13/2018 - 18:16 Permalink

RWE with 4 billion cash drain. Bad.E.on also messy. Veolia : weak balance sheet like many old utilities.Iliad too expensive.  Volkswagen : cash flow from operating activities for the group negative by  around 2 billion Euro, we have never seen that doing that before. Cash flow from investing activities - 16.5 billion. In debt and leasing we trust.Deusche bank : leverage still above 20

Reports from so called the strongest country in europe

Dead canaries in europe

www.canarydeath.com

 

Clowns on Acid Tue, 03/13/2018 - 19:26 Permalink

Yo Stevie boy....you say watch out for Wednesday ? Thursday is the Ides of March....get yer feckin' Shakespeare and yer feckin' dates right. It's also St Paddy's Day ....so their could be a few drunken algos at work as well.

Actually these 2 first weeks of March typically is when the Mutual Funds do their Quarterly rebalancing, the third week is when the action can occur.