I wrote here that we had likely seen the bottom of this years crash.
The bounce has been excellent but the call is, has the worst passed or are we in the middle of a long bear market with further moves back into an even deeper crash.
I use a Nasdaq projection as in the end the market is always about technology, so the Nasdaq it the benchmark for big moves.
Its so very easy to come out with this. We could laught it off, it that wasn’t the 2000 dotcom style of crash we can see the Nasdaq is capable of. If would be easy to laugh off if that wasn’t the level the market was trading at in 2018. Its not impossible, its not implausible. It would be horrible.
The big call is, have we seen the bottom of this bear market, are we going to new highs, sideways or have we just had a bear market rally with a lot more pain to come.
Luckily we have a great guide in the charts of the SP500, Nasdaq and Dow.
Take a look.
Dow
Nasdaq
SP500
If these markets break up through the down trend then its happy days. If it pulls back then we are back off to the recent low and if those lows got broken we would be in the nightmare scenario of a 50% decline from the all time high.
This is the chart of the SP500 adjusted for inflation.
As such another leg of a crash would bring the index back down towards the bottom of the Covid crisis crash to below 3000.
More likely would be a W bottom scenario.
But for now all eyes need to be on the simple channel top trend lines in the US markets. Untill the bearish trend is broken we can consider a continuation of this bear market to be the near future.
If the week of the15 August is strong that will be a good sign we are past the worst but if the market hesitates it will be time to make a plan for a major pull back and perhaps even for the next leg down.
What do I think?
It’s a good time to register a mental stop loss in your head because a sharp reversal could get very nasty indeed.
Food for thought.