Summary
Generally, we do not look for price analogies. But as Mark Twain said, “History doesn’t repeats itself, but it often rhymes.” This current rapid decline, with the S&P 500 (SPX) down 10% in just 16 days and starting from an all-time high (ATH), reminds us of the October 2014 pullback. Back then, the SPX dropped 7.4% from an ATH in 19 days and lost 9.8% on an intraday basis. The 14-day Relative Strength Index (RSI) fell to 29.2%, with the decline lasting four weeks and holding its 50-week average. The decline also occurred after about 1.5 years of weekly momentum divergences. The current decline is on week four, is occurring after a year of bearish weekly divergences, but is sitting below its 50-week. The bottom of the 2014 slide was marked by two large hammer candlesticks on the daily and a huge weekly hammer. The SPX went on to complete a quick “V” bottom and moved to ATHs. To throw some water on our analogy, market breadth is weaker now than in 2014 and, so far, bearish sentiment had spiked much higher back then according to the options market. The technical condition of the stock market continues to weaken and we are finally getting an SPX 10% correction, with more pain in the Nasdaq and Nasdaq 100 (QQQ). Ominously,
