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<\/figure>\n\n\n\nHere’s the Nas from the same time period. A nearly-100% rally was followed by a 40% drop. A range followed into Q4 2000 before the index broke down again. Notice the 21-week EMA was support on the way up in ’99 and resistance most of the way down.<\/p>\n\n\n\n Here’s the S&P from 2006-2009. The 50-week MA was an important dividing line, acting as support on the way up and resistance on the way down. All of 2007 fits in a range. The first nine months of 2008 fits in a range at a lower level. Extending backward from the breakdown level, the entire process took more than 2 years.<\/p>\n\n\n\n Here’s the Nas from the same period. It very closely resembles the S&P. An up-trend line was broken in late-2007 and then a range followed, with the 50-week MA acting as resistance twice.<\/p>\n\n\n\n Here’s today’s SPX chart. If a minor top is in place – meaning we’ll get a 20% correction and then a resumption of the trend – we’ll get a drop to 4000 and then the usual big rally off the midterm election year low. But if a major top is forming – one that’s going to last long and fall much further – we may only be halfway through the topping process. And then there’s the intense selling on the right side of the chart that hasn\u2019t taken place yet. In this case a drop to 4000 would be followed by a bounce to the 50 and perhaps a multimonth range before heading south again. The point being: don’t expect the current conditions to end soon. Even in the best of worlds, we have many months of extreme up and down movement ahead of us.<\/p>\n\n\n\n And here’s the Nas. It resembles the current S&P chart and the 2007-2008 Nas a chart. An uptrend line has been broken, and now the index is trading in a range, having been rejected once by its 50-day MA<\/p>\n\n\n\n Takeaways are: 1) tops take time to form, often more than two years; 2) there is a lot of big up and down movement along the way; 3) and even after the indexes are down quite a bit, they can still fall much further.<\/p>\n\n\n\n The market is in bad shape right now. The path of least resistance is down.<\/p>\n\n\n\n The question is: will this be a very normal, albeit painful, correction or something that more closely resembles the 50% drops we got in 2000-2003 and 2007-2007?<\/p>\n\n\n\n If you expect a normal correction, you are operating under the belief the Fed has a silver bullet it can fire to fix the current issues. In Q4 2018 they did an about-face with rates. In March 2020 they flooded the economy with money via quantitative easing.<\/p>\n\n\n\n In my opinion, those options are off the table. With inflation the highest it\u2019s been in 40+ years, they cannot keep rates low, and they cannot continue flooding the market with money. Cutting off inflation is a higher priority than propping the market up. Because of this, their hands are tied.<\/p>\n\n\n\n Will we get a 50% correction? I\u2019m not making that prediction. If I had to answer I\u2019d say no. But I do think much more downside is coming.<\/p>\n\n\n\n But the path the market takes to get there is the unknown.<\/p>\n\n\n\n Jason Leavitt<\/p>\n","protected":false},"excerpt":{"rendered":" The market is topping. These are long, drawn-out processes that often take upwards of two years to complete. Let\u2019s compare the current topping process to the Dot Com top and Financial Crisis top. Here’s S&P 500 from 1999-2002. Even though ’99 was a great year, in hindsight, it was the start of the topping process. […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[3],"tags":[],"_links":{"self":[{"href":"http:\/\/blog.leavittbrothers.com\/index.php?rest_route=\/wp\/v2\/posts\/15294"}],"collection":[{"href":"http:\/\/blog.leavittbrothers.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/blog.leavittbrothers.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/blog.leavittbrothers.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"http:\/\/blog.leavittbrothers.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=15294"}],"version-history":[{"count":1,"href":"http:\/\/blog.leavittbrothers.com\/index.php?rest_route=\/wp\/v2\/posts\/15294\/revisions"}],"predecessor-version":[{"id":15295,"href":"http:\/\/blog.leavittbrothers.com\/index.php?rest_route=\/wp\/v2\/posts\/15294\/revisions\/15295"}],"wp:attachment":[{"href":"http:\/\/blog.leavittbrothers.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=15294"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/blog.leavittbrothers.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=15294"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/blog.leavittbrothers.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=15294"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"\"\/](\"http:\/\/leavittbrothers.com\/blog\/i\/nasdc042822.png\")
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