This will be a history lesson for those who have never been here before and a terrifying warning for those who think the policies of the Federal Reserve and Congress will save them.
It will not.
If markets were classics, this market action would be Decline and Fall of the Roman Empire. We’ve all read it (haven’t we?), we all know the ending, and yet we are attracted to the history and the story with the drama, corruption, ineptitude, and disaster at the end.
If one is not old enough to have experienced what we are about to witness, let me provide some charts for context and the warning one needs to understand. And this time, for once, I’m not going to pound it home about the smart money, aka, bonds, but the equity markets.
The S&P 500 for starters as that is one of the most logical and broadest indexes to observe throughout modern history, not the Dow.
Historic, but why?
Let’s take a spin at the six month chart:
Has this happened before a major market shift after rallies? Oh yes. Let’s review the banking crisis of 2018 for example:
Yeah, that was ugly until QE∞ was introduced by Jay Powell on Christmas Eve.
And 2008?
Remember, it’s not always a definitive game changer for charts but it usually means an indication in sentiment or technical changes in future market direction, be it up or down.
And yes, even the .com era, 1999-2000:
Just for some perspective, here is the “Spinning Top” definition from Investopedia.com:
Sometimes spinning tops may signal a significant trend change. A spinning top that occurs at the top of an uptrend could be a sign that bulls are losing their control and the trend may reverse. Similarly, a spinning top at the bottom of a downtrend could signal that bears are losing control and bulls may take the reins.
Does this mean today’s market action is the start of major downside moves? Possibly. It will take more verification in the days ahead.
But the fact that a BOT, a Blow Off Top, occurred before a major quadruple witching expiration and during a turbulent period in the bond markets is not a good sign. As we enter into a major period of geopolitical, domestic political, and economic disruptions the odds are in favor that the market action today and next week possibly will mark a historic market top.
Everything that happens after that is, for lack of better words, not good.
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