S&P 500, Nasdaq: The Chart They Fear

I wrote on Forbes that we had likely seen the bottom of this year’s 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 because in the end the market is always about technology, so the Nasdaq is the benchmark for big moves.

It’s so very easy to come out with this:

We could laugh it off, if that wasn’t the 2000 dotcom style of crash we can see the Nasdaq is capable of. It would be easy to laugh off if that wasn’t the level the market was trading at in 2018. It’s not impossible, it’s 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 S&P500, Nasdaq and Dow.

Take a look.

Dow:

Nasdaq:

S&P 500:

If these markets break up through the down trend then it’s happy days. If it pulls back then we are back off to the recent low and if those lows get broken we would be in the nightmare scenario of a 50% decline from the all-time high.

This is the chart of the S&P 500 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 3,000.

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 U.S. markets. Until the bearish trend is broken we can consider a continuation of this bear market to be the near future.

If this week, August 15, 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.