Is It 1987 Again? For JPMorgan, These Two Charts Hold The Answer

Just hours after JPM's Marko Kolanovic doubled down, and after "explaining" this week's rout with Wednesday's "severe snowstorm" told CNBC to "buy the dip", JPM's chief technical analyst Jason Hunter had an entirely different message.

Contrary to JPMorgan's head quant, who sees the S&P hitting fresh all time highs soon, Hunter warned that the recent S&P decline, which failed to breach 2,800 resistance and broke through key support at 2,730 is "challenging our base-case outlook for an eventual recovery to new highs into the second quarter."

And while the chartist notes that a slump is not (yet) "the most probable outcome", and that he does not envision a material break below support in the mid-2500s, he urges clients to reduce exposure should the S&P slide below 2,610. In other words, in true "guaranteed to lose money" fashion, buy if others are buying, and sell when others sell.

Sarcasm aside, and before we show the chart that lays out all of JPM's support and resistance lines, the JPM technician makes an interesting detour into how he approaches late-cycle market corrections - such as this one - that have unfolded before the 2s/10s UST curve inverted during past cycles since 1980.

What JPM finds is that in virtually all cases, the peak to trough price damage was limited to 10% on a close to close basis, and by day 40 after the peak, the market had found solid ground.  JPM shows the average trajectory of all the S&P 500 Index drawdowns that exceeded 5% during the late-cycle periods before curve inversion in the chart below.

And while until a week ago, the post-correction recovery thesis was solid with the market since the January 26 highs tracking closely to the average reaction, last week's events have clearly violated this relationship and suddenly the BTFDers are getting cold feet.

What happens next? Well, it could get messy, because according to Hunter, JPM continues to view 1987 as an important analog for 2018, "as we anticipated a similar cross-market dynamic heading into the year whereby interest rate and curve volatility could be a primary driver for volatility in the equity market."

To underscore this, the technician notes a surprising similarity namely that to date, the 2018 pullback has traced out a similar trajectory as both the Apr-May and Aug-Oct 1987 corrections:

"In 1987, both correction periods traced out a remarkably similar path up until about day 35 from the peak. In the Apr-May period, the S&P 500 had established a well-defined range support zone with the initial pullback. The market had gone on to retest and hold that support in late May ahead of a powerful 20%+ rally to the Aug peak. The initial drop from that peak into Sep 1987 established range support in Sep, just as the market did in spring. Except the mid-Oct retest of that support failed to hold."

In other words, in 1987 it was roughly 40 days past the prior peak that the S&P decided whether to keep going higher, or crash. If indeed the current market is an analog, the S&P faces a similar choice now.

Some further observations from JPM:

We suspect that a confluence of stop orders through that support and the 10% peak to trough correction threshold triggered or at least contributed to the market dynamic that defined the three-day crash event. It is also worth  noting that the aggressive trend to higher Treasury yields and curve steepening reinforced the equity weakness until  the May and Oct 1987 bottoms. Even during the brief crash episode, the trend to higher rates reinforced equity weakness up until the last day of the meltdown. As far as that cross-market driver goes, the aggressive trend to higher yields and early-2018 curve steepening moves have in part reversed, so we see a low probability that the  equity weakness resumes with the same momentum it had in early Feb.

Unless, of course, it does... which is why JPM urges to keep a very close eye on which way the S&P will break next. And while another ramp higher obviously removes the risk of another "1987" event, a move below the 2,610-2,637 support confluence would leave the market susceptible to a retest of the key support in the 2,500s that held in Feb, according to JPM. Hunter's recommendation: "we suggest at least partially reducing the new long exposure accumulated during the Feb turn and on the early-Mar pullback if the market breaks below 2,610."

The 200- day MA has risen to 2,585, which sits just above the 2,541-2,557 Oct-Nov 2017 range lows and 2,533 Feb 15 trough. That area also roughly lines up with the 10% peak to trough threshold, an area that marked a floor for the majority of late-cycle drawdowns. Even if further weakness materializes, we think the market will hold that area, but would wait for a reversal pattern to set up before suggesting re-entering any long exposure reduced on the break below 2,610. Longer-term support rests at the 2,463 Jan-Mar equal swings objective, 2,417 Aug 2017 low, and 2,400, which marked a key inflection in 2017 – first as resistance and then support.

All this is summarized in the chart below:


rccalhoun Fri, 03/23/2018 - 12:19 Permalink

ZH blasts these brokerages, but when B of A, Morgan Stanley,Goldman et al write something that supports their is posted here as legitimate.  Same with bernanke and greenspan.  

rccalhoun Alexander De Large Fri, 03/23/2018 - 12:35 Permalink

ZH is a good place to post and vent.  Which makes me the most ill?  Hilldog, greenspam, goldman?   NO.  For me it is Jamie Dimon----the fucker that should have been imprisoned for life  (selling junk as AAA---what a cowardly thief), not only was allowed to stay in banking, but was bailed out and made wealthy by the taxpayer dollar and thinks he actually deserves his postion in life. 

Jamie Dimon---the true poster child for all that is wrong with the American crony corrupt system.  plus he looks like a fem.

In reply to by Alexander De Large

BrigstockBoy rccalhoun Fri, 03/23/2018 - 13:55 Permalink

Agree. And add to this the monetary penalties that JPM has been assessed under Dimon's leadership to see that from top down it's an unethical organization.

In December 2014, published a piece on JPM's fines to date. The article states, "All in all, JP Morgan was fined $35,241,500,000 in a three-and-a-half year period." Needless to say, there have been additional fines assessed since this point in time.

In reply to by rccalhoun

enf83 Fri, 03/23/2018 - 12:19 Permalink

In the news

Man Kills Himself And His Children Because His Wife Enjoyed Masturbating:

Couple Commits Suicide After Their Parents Tried To Separate them:

Man dies while trying to steal from a transformer:


Airport staff member get punished for being too handsome:

Girlfriend saves her lover’s life by cutting his throat:

Woman dies after husband uses mortar bomb as sex toy:

Father Joins Son To Rape His Young Daughter:


weliveinamatrix enf83 Fri, 03/23/2018 - 12:26 Permalink

how about this headline?   man goes crazy after masterbating 24/7 and making sure he was first on zh articles to post something that does not relate to this website, nor does anyone care...stay tuned for further information about how he can post links and beat off at the same time :-)

In reply to by enf83

ZeroSpam weliveinamatrix Fri, 03/23/2018 - 14:26 Permalink

▲▲▲   Enf83  ▲▲▲ CHRONIC SPAMMER  ▲▲▲ VIRUS ALERT ▲▲▲

When he gets back to his gloomy basement from his job cleaning bathrooms at Jack-in-the-Box and mopping floors at the porno theater, he jacks off and engages in conversations with himself here.

This Whackjob with Multiple Log-on's (aka "stizazz" and "lloll" "beepbop"  "Braveforce"  "PRIVETHEDGE"  "SLOPZ38"  "Schlomo Scheklestein"  "Jumanji1959"-- hopefully banned) is a CHRONIC SPAMMER whose "disguised links" ("Graphic Images", above) will take you to his Spam- and Trojan-laden webpage, fondly known by ZHers as "The Whacked Out Biblicism SPAM page" where you will be the happy recipient of numerous virus from this very disturbed and obsessed individual, spamming here for more than five years. 


•enf83  ("In the news" spam posts -- registered in Nigeria)
•celebrity-leaks (Biblicism goes Child Porn)
•Todaysfox   ("I made $7000 last week ..... this is what I do")


Copy and send this text to

Please remove all postings and ban log-on from user "PIER" who chronically SPAM posts short-URL links to his virus- and trojan-filled website. This is the same individual posting chronically as  "STIZAZZ" "PRIVETHEDGE" and "Enf83" "SLOPZ38"  "BRAVEFORCE"  "BEEPBOP"  "SCHLOMO SCHEKLESTEIN"  "JUMANJI1959", among dozens of other banned log-ons [that's YOU "NumbersUSA" and "dailywesterner" and "biblicisminstitute" and "celebrity-leaks" (porn) and "I made $7000 last week...."]. Thank you.

In reply to by weliveinamatrix

Conax Fri, 03/23/2018 - 12:39 Permalink

If they didn't want the giant bubble to burst they wouldn't have spent the last year pumping it like a daytime hooker.  This is all a recurring op to drop the prices of all assets to near zero as the usual suspects show up with their carpetbags full of fiats.

And the hapless people said, "duhhh" once again since those that survived the Great Depression and their wisdom have all passed away.

It must be time. Time to shear the sheep.

Cosmicserpent Fri, 03/23/2018 - 13:49 Permalink

1987 is never going to happen again. That was before the PPT was formed. Before circuit breakers were instituted and before QE to infinity was a reality.


In addition this "advice" in the article is FUCKING RETARDED. Essentially telling retail that if it blows through 2610 Sell! because it MAY hit 2500!  If you were paying attention you should have sold two weeks ago and dropping another 100 points means that you should now buy. Fucking crooks should be drawn and quartered and their heads stuck on the Bull Market statue on Wall Street.  

farmerbraun Cosmicserpent Fri, 03/23/2018 - 14:04 Permalink

True . . . not exactly the same as 1987. To me 1987 was challenging. A month before it blew I bought the family farm at auction for $1.3 million , using a two year bridging finance contract for 50% of the purchase price, at consecutive 180 day interest rates of 26%; 22%; 19% , and 17.5%.
After she all blew the revalued farm business had lost $325,000 of its supposed $650,000 of equity. Seriously underwater, but less important than the fact of the interest payable on the loan being 120% of expected GROSS income . . . . negative -amortising , of course :-)

Aah! The good old "balloon loan" . . . . it's enough to bring tears of joy to an old usurer's eyes. Bless!

In reply to by Cosmicserpent

TrainReck Fri, 03/23/2018 - 15:28 Permalink

It's not 1987 all over again, it's 2009 X10.  The shit is just starting to hit.  Mega bubbles beyond anything in history and the ensuing Train Reck of cataclysmic proportions.  Talking heads will continue to say BTFD.  Good luck with that.  I haven't seen any Trump tweets lately about how fantastic the economy is doing & Jobs, Jobs, Jobs.  As luck would have it I did see a Help Wanted at the local Subway yesterday.  

GotGalt Fri, 03/23/2018 - 17:47 Permalink

Fucking amazing how S&P stops tanking right at the end of the day when it got within 0.5 points of hitting 200dma.  Like clockwork!  Monday will be EXTREMELY telling.  BTFD?  Or RFTH? (Run For The Hills)

Boris Badenov Fri, 03/23/2018 - 20:09 Permalink

You had T-bond futures based on an 8% theoretical yield in 1987, trading at a DISCOUNT to par.

Nowhere near that in 2018.

You have CLOUD stocks making up 25% of S&P (yet only top 10 stocks of 500).

Clouds are made up of AIR, poof!


Yes The AVERAGES could take a huge dump, yet it would only involve a few stocks.