On August 24th, when you woke up and soiled your office chair as you logged into your trading account, I spoke with you about regardless of the situation the market faces, time is the best healer of moves similar to what we saw leading up to and including that date. That three day drop, the breadth signals and all other stats immediately registered the 1998 analogue I wrote about here a few times in late 2013 and 2014. On Tuesday that week I wrote:
I don’t for one minute doubt that any of this is over, or that we don’t take out a low at some point, but over the next two months, your ultimate trading signal for market gyrations will be to figure out what the pain trades will be. We did this in 2011 for two months. It was a lot easier to predict than you might think.
2010 and 2011 were referenced as a possibility on my post from 8/24, but after a few days, they were ruled out for a few reasons. Let’s focus on the price comparisons first as to early signs that this was not going to play out like 2011.
Here are the charts. I’ll let you compare, and we’ll discuss in the chat the distinct differences and why they mattered.
2015
1998
2011
Feel free to discuss.
OA
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Meant to say thanks in the last post, been beyond on point the last 6 weeks or so. I am also thankful for $TWTR, volume pockets, and weekly options.
Best OA headlines of the week: ‘gratitude for me’ …’major wood pattern’. LOL
Sideburns Lady, and the mutants over at table 7
At family gatherings, I refer to some of my cousins as “the mutants from table 9.”
LOL! Epic movie!
Now fully short here via 3x short ETFs on my home index the FTSE.
Looks like the selling has already begun.
Be interesting to see a 1987 comparison…the bulls don’t like that one much though.
Good luck all.
Later.
Let us know where your stops are.
Why don’t the bulls like that one? Quick crash and recover. That’s what I’d like to see as a bull, not a long 2-3 year slow grind lower.
Everyone went to cash in August. Short interest levels are off the charts. What’s not to love?
OA, A great educational exercise, but I’m hard pressed to see the differences early on. Do tell.
Here’s another one for you: 1994
http://stockcharts.com/h-sc/ui?s=SPY&p=D&st=1994-01-03&en=1994-05-25&id=p04823206070
I like this one better since it’s more similar in magnitude and investor apathy. But I’m also pretty skeptical about following analogs.
Write this down for future market volatility/corrections.
“If you test early, you test often.”
Both in 2015 and 2011 the Monday move consolidated for about 4 days. 7 days after that consolidation the 2011 analogue was testing lows, 2015 was testing highs. You can see a small trend develop higher in 2015 that is not present in 2011.
The fact that 2011 was quickly back to lows meant that prices would act around those levels and were more comfortable with them. The more touches you get from lows, the more likely they’ll break.
1998 had an identical move up in said time frames.
Hope this was helpful.
OA
Yes very helpful. This stuff is so interesting yet hard for the novice to detect. Comfortable with levels. I’ll remember that. Thanks so much!