Worst start to a year…ever

A 6% fall in 5 days for the S&P 500 is the worst start to a year in the US…ever. In the great scheme of things this is a completely meaningless statistic, but, taken along with recent market action, could there be some genuine cause for concern?

Looking firstly at the UK (page 3), there is something of a line in the sand at 6,000. We are currently at 5,912 and need a three to four-day print, under 6,000 and ending below the August 24th intra-day low of 5768, to make the case for the bears and the “watch out below” scenario. The top patterns, in 2000 and 2008, are very similar to today’s; a rounding shape over a two to three-year period evidencing the distributive phase between buyers and seller, culminating in a significant fall.

In the short term the “Armageddon” narrative has been overdone and a rally back towards the falling 200 day moving average is quite likely. There are any number of players keen to put a base under markets – the Fed, the ECB, the BoJ and let’s not forget the People’s Bank of China, who probably have the largest stake to play with as well as the most to lose.  

David Fuller's view

I love to see how subscribers use our charts and Clive is certainly a pro.