3 Ugly Technical Set-Ups for the S&P 500: Is This Time Different?

After last Thursday's mini-crash I did some research and found that the technical market picture for the S&P 500 (INDEXSP:.INX) is not particularly appealing in the short term. I have found three different troubling technical backdrops that suggests that we may see lower equity prices in the near term.

1.   Monday was the 3rd largest gap up ever recorded for the S&P. Take a look at how the other two played out…coincidentally they both happened during the 2008 bear market. The announcement of the US TARP back in 2008 was the start of a major decline. Thus, you may want to take note that Monday was Europe’s version of the TARP.

2.   The advance decline ratio on Monday was a ridiculous 18 to 1 and the only time it has been that high in the past 15 years was October 13, 2008 when it hit 19 to 1. While an advance decline figure in the high teens may sound bullish the above chart doesn't prove that to be the case. I understand that one occurance is no where near statistically significant, but in context I think it bears relevance. A number that high also suggests short term upside exhaustion.

3.   We have had several mini crashes similar to last Thursday in history and all of them either followed through to the downside or at least retested the lows of the move. Here are five chart examples:

 

 

 

 

I am not making any predictions about the near term market action other than pointing out that the recent market action looks similar to these past instances. In my opinion, the current market looks most similar to April 4th, 2000. Its interesting how no one remembers that day as being particularily volatile. I'll never forget it because the Dow fell in excess of 700 points in less than a few hours and then recovered most of it by the close. In addition, it is the only time that I can remember the S&P and Nasdaq futures ever hitting two limits down on the same day.