Last week I looked into S&P's monthly chart for clues on the long-term trend (see chart below). Most indicators point towards a new Bull Phase despite the general bearish sentiment in the market this week.
** The 'Megaphone of Death' ** I went a time-frame lower into 1W and found something I wanted to share with you. S&P500 recovered slowly after the 1987 Black Monday crash and before the aggressive Bull Phase of the late 1990s, it had a turbulent period within a Megaphone pattern in the early 1990s. That volatile period resembles the price action since early 2018, which has formed the pattern I previously called 'Megaphone of Death'. The past two plus years have also marked a turbulent period for the markets (after an uninterrupted growth phase of 10 years since the subprime crisis) as the U.S. - China trade war and the COVID pandemic issued Lower Low corrections from the Higher Highs (thus creating the Megaphone).
** Will history repeat itself? ** As you see both Megaphones are fairly similar, their Highs and Lows match. Currently we are on the (g) leg. If history is repeated, the correction of these past few weeks should be over soon and the following quarters should see Higher Highs and Higher Lows.
What do you think? Are you a buyer or a seller on this one? Feel free to share your work and let me know in the comments section!
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Interesting pattern catch. With QE in full effect for decades and at it's crazy Covid-19 highs it seems the two time generally don't compare. If history repeats itself then the S&P would quadruple the next ten years and centrals banks would successfully navigate around the collapse of the global financial system extend the bubble further.
tkits
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we all seem to be forgetting. earnings, if they are still something that investors consider in this ponzi market, will/should be adjusted shortly. in the old days, earning calls would now be out the window and instead of seeing people buying with glee at 60 or with Tesla at 1000 times earnings, the market would have properly priced this in.
so to think that "smart money" will drive this higher, is in my opinion, a classic ponzi.
there is a fool born every minute. and the phrase " it's different this time" has come home to roost many a time, and will come again
bazkie
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@tkits, true, but it is a FED-supported ponzi, so that does give it some.. heh, I'd almost say 'credibility'.
(it would be healthy if it'd crashto 50% lower, of course)
tkits
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@bazkie, yes but the feds cant keep this up, at some point all that printed money will go up in smoke. You cant throw 100 years of market fundamentals and market truths out the window and say they don't exist.
UnknownUnicorn100937
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@tkits, could we make the case that as long as the feds control the money supply and there are no other viable alternatives, they can pretty much do a lot of "interventions" as they deem fit? The money won't go up in smoke. It will prop prices higher.
nzahir
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Buffett Ratio was 1/3 in 1991 and the PE ratio is much higher now as well
Equities in the US are overpriced, no other way around it, especially large cap
Time for common investors and new money to get crushed
UnknownUnicorn100937
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I think SP500 will keep edging higher with inflow of smart money, even though with minor, normal corrections from time to time.
CryptoSnoopy
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@idz, its more retai dumbs who pushes those prices up..
UnknownUnicorn100937
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@CryptoSnoopy So you're expecting a market meltdown?
satiev1
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Historically over 100 years of data the market only has 1 40-50 percent crash once every 10-20 years. We just had it in March after 20 years. I'm in line with the start of a new bull market theory. Along the way we will have 15-25 percent corrections once a year.