Given the recent “market turmoil” I’ve spent more time studying Monthly charts for clues on what to expect next – now that it looks like the SPX may have put in a significant top.
I pay particular attention to the last two major tops – with respect to the configuration of certain indicators.
I posted this monthly chart in early January pointing out how the MACD configuration at the time was consistent with that of the prior market peaks, but today I wanted to point out the potential for a “throwback” to a couple moving averages I noticed.
The throwback I’m talking about is to the area of the “underside” of the 10-month and 20-month moving averages (on the monthly timeframe). Notice below that both the 2000 peak and the 2007 peak had two things in common – the 10-month sma crossed down through the 20-month sma and it was all downhill from there.
Except for the brief reprive of the “throwback”.
The throwback to the “area of the 10/20 cross” seems close enough for government work.
I’m particularly interested at how the price had a tendency to retest the area where the 10 crossed down through the 20.
So here’s where we are now and here’s what a throwback might look like.
Keep in mind since these are Monthly moving averages they don’t travel far very fast.
Right now everyone seems a bit overly bearish (perhaps rightly so given the recent price action).
However it won’t surprise me over the next few months to see a “rip-your-fur-off-dead-cat-bounce” which could take the price up to test the underside of the 10/20 sma’s – just like last time. Maybe it’s in March, maybe in April.
At that point we will hear a lot of “the worst is over” talk and it won’t surprise me to see the “buy everything” mentality resurface, at which point I’ll refer back to these charts and know what to expect next.
But then again, maybe it’s different this time…