I read an article recently citing Jeremy Gundlach stating that bear markets often start w/ a crash followed by a complete recovery. That fact surprised me so I went and checked out the chart for 2007. Surely enough, the market collapsed when the subprime crisis took hold, but then immediately recovered to the ATH and beyond.
What also struck me was how similar the sequence of peaks and valleys during 2007 mirror the chart for the past 2 years. Look at the rally to ATHs, then a W formation on the bullflag, a subsequent higher high on the false breakout (Both at around the 1.24 extension), followed by a bear flag and a V bottom recovery powered by a Fed policy change. The similarities are uncanny.
Now I'm not saying we are going to repeat 2007, but several things here stand out to me:
1) The rate/pace of the recovery seems to mirror the rate of the initial run-up to the bull flag. As such it wouldn't actually surprise me to see the indices start rising FASTER in a parabolic trajectory, especially after the ATH has been successfully retested.
2) That said, we can rally all the way up to 300+ and STILL be in a bear market. Breaking and making an ATH changes nothing in that context.
3) Bears and bulls alike believe that the index has to double top before any imminent fall. That didn't happen on Oct 11 2007, the market didn't sniff those levels again until 5 and half years later. Maybe V bottoms give you V tops?
4) I'm display the current day chart in a 3-day TF to make the number of candles similar to 2007. If we look at MFI and Fib retracement we seem to be at the same point in the rally as Oct 5 2007. The market went on to make the ATH 5 days later. The current day wedge looks like it can also fit 5 more candles... giving us 15 more trading days until the wedge resolves.
I'm actually going to buy some May 3 SPY calls and just see how it goes.
What also struck me was how similar the sequence of peaks and valleys during 2007 mirror the chart for the past 2 years. Look at the rally to ATHs, then a W formation on the bullflag, a subsequent higher high on the false breakout (Both at around the 1.24 extension), followed by a bear flag and a V bottom recovery powered by a Fed policy change. The similarities are uncanny.
Now I'm not saying we are going to repeat 2007, but several things here stand out to me:
1) The rate/pace of the recovery seems to mirror the rate of the initial run-up to the bull flag. As such it wouldn't actually surprise me to see the indices start rising FASTER in a parabolic trajectory, especially after the ATH has been successfully retested.
2) That said, we can rally all the way up to 300+ and STILL be in a bear market. Breaking and making an ATH changes nothing in that context.
3) Bears and bulls alike believe that the index has to double top before any imminent fall. That didn't happen on Oct 11 2007, the market didn't sniff those levels again until 5 and half years later. Maybe V bottoms give you V tops?
4) I'm display the current day chart in a 3-day TF to make the number of candles similar to 2007. If we look at MFI and Fib retracement we seem to be at the same point in the rally as Oct 5 2007. The market went on to make the ATH 5 days later. The current day wedge looks like it can also fit 5 more candles... giving us 15 more trading days until the wedge resolves.
I'm actually going to buy some May 3 SPY calls and just see how it goes.
