When I check up daily on charts of major risk assets, the S&P 500 (SPX) sticks out like a sore thumb, but not for the apparent relative strength to most equity indices the world over. Let me explain.
Let’s start with the one year chart. After making a new all time high, you have last Spring/Summer’s long consolidation in about a 4% range. That broke in late August, violently, with a peak to trough decline of about 12.5%.
There was a failed retest of the August low resulting in a W bottom then a sharp rally that began in September. But it failed to make a new high from last Spring.
Then we got a series of lower highs and lower lows, (which some would call) a healthy two month consolidation in a 5.5% range from the high, until the next violent break lower, this time with a greater peak to trough decline of about 14.25%.
Yep, another W bottom made in February (more on that later). Then a two month rally that eclipsed the breakdown level, but not only failed to make a new all time high, but failed to break the November high.
So now the SPX is in a downtrend, down about 2.5% in the last month. Many are calling it another “consolidation” before a breakout to new highs, but I’m not sure why it would be different than than the last two times.
A quick look at the two year shows the two lower highs. It’s that February low that I am fixated on. It’s below the Sept low, and importantly below the October 2014 low:
Why so fixated on the February low? Because that’s a marked change in the technical make up from the 2009 lows, the first lower low in the entire 200% plus rally. A break of the long term uptrend at 2000 would be about 5.5% off the April highs, with little support below to the February lows of 1810:
And what lies beneath the Feb low of 1810? Well, a massive gap to the 2013 breakout at 1550, which would mark about a 27% draw-down from the May 2015 highs:
Yeah I know there are lots of other stock markets, but the SPX is the biggest. And there are few on the planet with any heft that trade as close to their all time highs as the SPX. Which is why I spend the most time looking at it. The Nasdaq Composite is nearly 9% from its all 52 week highs, The Russell 2000 down 14%, The Nikkei in Japan down 21%, the DAX in Germany is down 16%, The Hang Seng in Hong Kong is down 30% and the Shanghai Composite is down 45%. You get the point. Relative to the SPX, global equities act like shit. So let’s keep an eye on the SPX, because I doubt a third breakdown in a year after a downward consolidation will be a positive event for any of the equity indices listed above.