Thursday, July 1, 2010

Another Historical Market Comparison for You to Check Out

After looking at the 1930 bear market and attempting to compare our current market to it a few days ago, I thought, "why not look at the most recent bear market we've had and see how they compare?"   Once again, the visual comparisons were a little too similar for my tastes.   We'll see if this means anything over the next few weeks.

First up is the S&P from late 2007 to right now.   Charts look very similar.

S&P Late 2007
S&P Now
 What Happened After the 07 Top

Now the Nasdaq - same visual similarities are present.

Nasdaq Late 2007
 Nasdaq Now
What Happened After 07 Top
All Charts from Telechart, Courtesy of Worden Brothers, Inc.

Again, these comparisons may not work out the exact same but I think they are worth looking at.   Based on what happened then, we should probably see some attempted reversal days soon where the market sells off hard but then comes back to close positive.  I would not be surprised to see one today or tomorrow - that's why my one short is very short-term - but back in 2007-2008, those reversal days more often than not amounted to nothing.   I would specifically watch for resistance around the 9 day exponential moving average and then the 20 day exponential average for the market and shorts as those levels worked well in 2008. 

Overall, we are likely in for some volatile trading conditions for a while, so be careful.   If time allows, I'll try to put a video together over the next few days about how to look for shorts using Telechart and what to look for in potential shorts.   Seems likely we'll be needing to use that information for the foreseeable future.

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