Comparing The Current S&P500 Chart To 2008 (ES)
Hi friends! Welcome to this update analysis on the S&P500, via the E-Mini futures contract! Let's get right to it!
In front of you, I have the current S&P500 chart on the left, and a chart of the financial crisis on the right. I have covered the similarities between the two on multiple occasions, but as the current chart continues to develop, it is still printing new similarities to the price action during 2008.
Looking at the chart on the right, you can see that the S&P was in a major uptrend, but eventually put in a head and shoulders formation at the top (above pink neckline,) and then plummeted to the bottom of a then newly formed downtrend channel (in blue.) Looking at the current S&P500 chart on the left, we can see that price followed that exact pattern. We rallied up hard, and then began to form a head and shoulders pattern above the pink neckline, as the Federal reserve's minor 0.25% rate hikes began to send shock-waves though our artificially inflated market. If you remember my analysis on the collapse from that head and shoulders pattern, I was able to call it PERFECTLY, because I understood how the similarities to 2008 were likely to develop. That chart will be attached below for your viewing pleasure.
So, now we have a situation where the market has tried to break out above this newly formed downtrend channel, just like it did in 2008. And, in similar fashion, we have failed to stay above that level, and price has fallen back into the downtrend channel. With that said, this market is a bit different than 2008. For starters, we are currently sitting at 2817 on the S&P, while at a similar junction in 2008, price was near 1400. When you take interest rates into account, they were at 5.25% in '08, and the Fed cut them to zero, in order to stimulate economic growth. Today, the market is nearly twice as high, and the rates are less than half of what they were in 2008. So, the Fed's ability to stimulate the economy with rate hikes is severely diminished, in comparison to '08. Not to mention the fact that they now have trillions of dollars of assets on their balance sheets. But, that's a discussion for another day.
Looking at the moving averages, we can see that just after the head and shoulders formations on both charts, the S&P printed a death cross. However, on the current chart, price printed a golden cross a couple weeks ago, which never happened on the 2008 chart. So, the current market is definitely showing more strength than what was seen at a similar point in 2008, but a potential market meltdown still exists because of the technical similarities. With that said, I wouldn't trade that idea until price starts to break down below the 50 and 200 period moving averages, because it is technically above support right now. On the other hand, if price continues to march higher, and especially if it takes out the all time high, we may see a powerful upside continuation of the bull market. Personally, I don't think that will happen, particularly because of the global economic slowdown that is emerging, as well as yield curve inversions and a likely continuation in the trade war.
The next couple of weeks will shed more light on the forward direction of the market, but as of now, there are still many technical similarities to what was seen in 2008.
I'm the master of the charts, the professor, the legend, the king, and I go by the name of Magic! Au revoir.
***This information is not a recommendation to buy or sell. It is to be used for educational purposes only.***
-JD-
In front of you, I have the current S&P500 chart on the left, and a chart of the financial crisis on the right. I have covered the similarities between the two on multiple occasions, but as the current chart continues to develop, it is still printing new similarities to the price action during 2008.
Looking at the chart on the right, you can see that the S&P was in a major uptrend, but eventually put in a head and shoulders formation at the top (above pink neckline,) and then plummeted to the bottom of a then newly formed downtrend channel (in blue.) Looking at the current S&P500 chart on the left, we can see that price followed that exact pattern. We rallied up hard, and then began to form a head and shoulders pattern above the pink neckline, as the Federal reserve's minor 0.25% rate hikes began to send shock-waves though our artificially inflated market. If you remember my analysis on the collapse from that head and shoulders pattern, I was able to call it PERFECTLY, because I understood how the similarities to 2008 were likely to develop. That chart will be attached below for your viewing pleasure.
So, now we have a situation where the market has tried to break out above this newly formed downtrend channel, just like it did in 2008. And, in similar fashion, we have failed to stay above that level, and price has fallen back into the downtrend channel. With that said, this market is a bit different than 2008. For starters, we are currently sitting at 2817 on the S&P, while at a similar junction in 2008, price was near 1400. When you take interest rates into account, they were at 5.25% in '08, and the Fed cut them to zero, in order to stimulate economic growth. Today, the market is nearly twice as high, and the rates are less than half of what they were in 2008. So, the Fed's ability to stimulate the economy with rate hikes is severely diminished, in comparison to '08. Not to mention the fact that they now have trillions of dollars of assets on their balance sheets. But, that's a discussion for another day.
Looking at the moving averages, we can see that just after the head and shoulders formations on both charts, the S&P printed a death cross. However, on the current chart, price printed a golden cross a couple weeks ago, which never happened on the 2008 chart. So, the current market is definitely showing more strength than what was seen at a similar point in 2008, but a potential market meltdown still exists because of the technical similarities. With that said, I wouldn't trade that idea until price starts to break down below the 50 and 200 period moving averages, because it is technically above support right now. On the other hand, if price continues to march higher, and especially if it takes out the all time high, we may see a powerful upside continuation of the bull market. Personally, I don't think that will happen, particularly because of the global economic slowdown that is emerging, as well as yield curve inversions and a likely continuation in the trade war.
The next couple of weeks will shed more light on the forward direction of the market, but as of now, there are still many technical similarities to what was seen in 2008.
I'm the master of the charts, the professor, the legend, the king, and I go by the name of Magic! Au revoir.
***This information is not a recommendation to buy or sell. It is to be used for educational purposes only.***
-JD-
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