Into Monday’s close on 8/20 we put up this post that suggested the statistical aspects of that day’s price action were bearish, and in-line with the statistical characteristics of areas since 2007 that were at, or very close to, major tops.
Not only were the statistical aspects of that day’s price action bearish, the pure look of the chart after that day was ominous – the SPX put up what look to be a nasty looking bearish wick that day, similar to wicks put up at the top in 2007, summer 2008, April 2011 and May of this year.
By bearish looking we mean that on 8/20, the SPX opened higher, but immaterially so. The index was then gunned through the morning and was up ~75 bps to ~1,425 at one point, paused and reversed all of those gains and more through the rest of the day to end in the red.
There was no price action in the region above ~1,418 in the days/week preceding Monday’s morning rally. And now, a few days later, the chart shows that there has been no price action or trading activity above this region, excluding Monday morning’s pop to 1,425, thereafter.
In effect, Monday’s move into 1,425 stands out on the chart now as a price level that appears to have been decisively rejected, hence the bearish wick.
Such wicks and price action tend to mark exhaustion points.
Lastly, we would be remiss not to point out how similar the move off the low in the SPX this June, compares to the move off the low in March 2008. These rallies can be compared by looking at and comparing points (A) to (B) and (C) to (D).
While we hesitate to ever call out what happened in 2008 as a possibility as we are not gloom and doomers, it’s also our responsibility to call it as we see it, and the comparisons in the chart appear uncanny.