Friday, October 14, 2011

This Pattern Seems Familiar...

There has been no shortage of recession talk over the last several months, but the bears' conviction has waned somewhat with the recent 13% rally in the S&P 500.  Still, the trading pattern of the S&P 500 has been remarkably similar to the last time that we went into a recession in October 2007.  Back then, we had a 5 month 20% decline from October 07 through March 08.  That was followed by a strong 15% rally which ultimately faded.  Everyone knows what happened in late 2008...

October 07-July 08. Click to Enlarge.

This time around, we've had another 5 month, 20% decline followed by a 13% rally.  Even the internal structure of the 20% decline (in terms of timing of relief rallies) is eerily similar to '07-'08.  What happens next?

Click to enlarge

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