Monday, 12 October 2015

S&P 500's 2015 plunge & upwards correction look remarkably similar to 2000 & 2007 tops

The S&P 500's price action from late July 2015 bears some remarkable similarities to the price action in the periods following the big tops of 2000 and 2007. Most remarkable to me is that the market is currently testing trend channel resistance running parallel to channels which occurred subsequent to the 2000 and 2007 peaks, suggesting that the market is now at a juncture where a secondary peak could be close or already in. Charts in this post include all sessions trade.

First chart shows the action following the 2000 peak. Main points to note are the swift initial plunge, and the angle of the subsequent upwards correction.



Second chart shows the action following the 2007 peak. The most remarkable similarity to the 2000 peak is that the upwards correction following the January 2008 low occurred within a channel running parallel to the channel seen immediately after the 2000 peak. Also of note is that the upwards correction retraced a Fibo 61.8% of the initial decline.



Third chart shows the action from late July 2015. Not the peak for the S&P, but the peak for tech stocks, and the point where the market turned down hard. The most remarkable similarity to the 2000 and 2007 peaks is that the upwards correction following the August low has so far occurred within a channel running parallel to the channels seen after the 2000 and 2007 peaks. Also of note is that the upwards correction has again retraced a Fibo 61.8% of the initial decline, exactly where the early 2008 secondary peak was formed.


The main point of difference between the 2015 chart and the others is the short duration of the upwards correction following the initial plunge. Perhaps the market will respect the channel and turn down now, but return to the upper line again some weeks from now, before finally turning down hard? Or maybe the analogous behaviour will fall apart entirely? Due to the larger degree Elliott Wave count (not shown here, anyone interested?), I think the 2015 peak is of larger degree than the tops that occurred in 2000 and 2007, so the market will decline more swiftly and strongly this time, with upwards corrections being briefer. Therefore I am looking for a major secondary peak to form soon around current levels. Let's see.