Here is a look at the “Scariest chart in the world.”
The Scariest Chart In The World
September 23 (King World News) – Top Citi analyst Tom Fitzpatrick: The “Scariest Chart in the World” is the Monthly chart of the NASDAQ.
The NASDAQ was above the 55 month moving average on a monthly close basis for 10 years and 1 month until Feb 2001 (The same month that we revisited and closed below the 200 week MA).
We closed below the 55 month MA average in Feb 2001 (11 months after the trend peak). October 2022 would be 11 months since this trend peak in November 2021.
That ultimately paved the way for a move to the 200 month MA in Sept- October 2002 off which it posted a bullish outside month for the first time in the downtrend ending the bear market.
We have now been above the 55 month moving average on a monthly close basis for exactly 12 years at the same time that we are re-testing the 200 week MA.
The 55 month MA stands at 10,538 with the year’s low at 10,565.
A monthly close below, if seen, would suggest a danger of an extended move to the 200 month moving average as we saw in 2002.
“Scariest Chart In The World” Shows A Major NASDAQ Crash Is Coming
In that respect there are a few things to note.
This is suggesting that the bear market in equities is likely longer and deeper.
When we look back over the last 50-years we identify 3 other periods where we saw a more extended setup like this (using the S&P as a reference) They are 1973-1974; 2000-2002, 2007-2008/9.
During this period the average fall (S&P) was 52% high to low over 24 months.
We are particularly focused in respect to the S&P with the 1973-1974 period when it fell 48% over 21 months.
We are also refocusing on the S&P as we head yet again towards levels that could constitute a bearish outside year for only the 4th time in nearly 100 years (The others being 1937, 1966 and 1973).
In 1973 the S&P went below the level that was needed for bearish outside year in July and bounced. It then went back below it in November (4 months later) resulting in a sustained break and a bearish outside year at the December close. That set the store for a 30% fall in 1974 and a high to low drawdown in 1973-1974 of 48%.
The 1973-1974 backdrop is the one that resonates most with us and the S&P still tracks that analog quite well.
* Fed losing control of inflation
* Oil price shock
* Geopolitical shock (Arab-Israeli War)
Overlay Of 1973 S&P (PURPLE LINE) vs Today (BLACK LINE)
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