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As we all know the markets took a beating last week, driven by President Trump’s tariffs announcement and retaliation by China. The S&P 500 fell by 10.5%, the Nasdaq by 11.4% and the Dow by 8.1% over two days.
From Michael O’Rourke at Jones Trading (no relation), “The S&P 500 sell-off Thursday and Friday is among the worst two-day declines for the benchmark index in history. The move is only surpassed by the 1987 crash, the pandemic, and one of the many sharp declines during the Global Financial Crisis. In each of those instances, the S&P 500 continued to experience outsized volatility, but it did bounce notably over the next two weeks. The pandemic was the only “V” bottom among the episodes.”
The biggest question is, “Has the market reached a low or will the sell-off continue?” Based on the futures market Sunday evening it looks like Monday could be another brutal day.
One way to try and determine the answer is to look at chart patterns.
Carter Braxton Worth of Worth Charting published a report on Wednesday last week after the close when the S&P 500 closed at 5,671 that showed how the Index could fall to 4,850, or 14.5% for a total decline of 21.25% from the Index’s high water mark. His first chart is a 10-year weekly bar chart that showed an unfilled gap at 4,842.
S&P 500 unfilled gaps
Carter Braxton Worth at Worth Charting
On Friday Worth published another report with multiple charts showing a decline to approximately 4,850+/-. This chart compared the current S&P decline if it were to fall to 4,842, down 21.25%, to the Covid low in early 2020 of negative 35.4% and the 2022 bear market decline of 27.55%.
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