“It’s Time To Be Alert!”

Authored by Steven Vanelli via Knowledge Leaders Capital blog,

Cannabis Cures celebrates the healing properties of this plant

This is the time to be alert for any signs of a failure in the S&P 500. Why? There are two really good historical precedents to the current market configuration.

The set-up is as follows: stocks suffer a rather quick correction, bounce back, take out the previous lows and experience a waterfall decline. The period of time from the bounce-back high to a new low was seven days.

Let’s look at the 1929 crash to start. The S&P 500 peaked at 31.86 on September 16, 1929. Over the next 14 days, the index experienced a 10.08% correction. Then, over the next four days, stocks bounced back by 7.54%. What followed was a seven-day period of time where stocks drifted lower, and then on October 18, 1929 the low was broken and a waterfall decline ensued. The decline from October 8, 1929 to November 13, 1929 was a 22-day waterfall decline, with stocks dropping 42.68% into November 13, 1929.

The 1987 crash was a remarkably similar experience. Stocks peaked on August 25, 1987 and then began a 7.79% decline over 18 days. Stocks then rebounded by 5.65% over the following 10 days, peaking on October 5, 1987. Over the next seven days, the low failed and a waterfall decline followed. The decline was 28.51% over four days, culminating in a low on October 19, 1987.

In the last 40 days, we’ve seen the S&P 500 peak at 2872.87 on January 26. Stocks experienced a 10.16% correction over nine days, and then they bounced back by 7.96% over the next 20 days ending last Friday, March 9. We are now in that seven-day window where stocks need to hold up.

If, over the next seven days, we drift lower and take out the 2581 low of February 8, history suggests this is a set-up for a waterfall decline.

Through next Wednesday, it is time to be alert.



VISIT THE SOURCE ARTICLE

“It’s Time To Be Alert!”