Loading ...As our friend Dimitri Speck noted in his recent update, the chart pattern of the SPX continues to follow famous crash antecedents quite closely, but obviously not precisely. In particular, the decisive trendline break was rejected for the moment. If the market were to follow the 1987 analog with precision, it would already have crashed this week. Nevertheless, we wanted to show one more parallel in connection with the previously discussed “flight to fantasy” effect. As we mentioned when we posted this chart, the divergent DJIA/NDX peaks we could recently observe happened in 1987 as well. Here is a chart of the event:
Divergent highs and lows in the NDX compared to the DJIA in 1987. The similarity with the recent divergence at the peak – which took even almost the same time to develop (DJIA peak on Jan 26 vs. NDX on March 12) – is quite glaring. It is one of several reasons why we believe the January top in the major benchmark indexes may turn out to be a significant one, regardless of whether an 87-style crash wave develops.