$SPY Weekly. Left – Current. Right – 2008.

When you look at the weekly chart of the $SPY, it looks like we are very oversold and could be due for a bounce. Look at MACD and the dropping RSI! And sure yeah, we could be due for a bounce.

But to the right of the image, I’ve shown the weekly chart for $SPY in 2008. You can see that we had a very similar topping out pattern. New highs, followed by a steep drop…a gradual climb back up to just a slightly higher high and then fade. Obviously there are some differences in how fast the events occurred but the pattern is similar.

Now, looking at where we are today, compared to 2008, there are still a lot of similarities. Big drop and MACD coincidentally is around -4. In 2008 though, we did catch a short term bounce, and it even looked like it possibly could’ve recovered by the summer of 2008, before it put in a lower high at the 200 day moving average, and then eventually things hit the fan and look how much further down we went.

So.. we might not be in the exact same situation, but there are a lot of concerns. Debt levels are high, interest rates are rising, and a lot of suggestions that we’re at that point in the debt cycle where things correct. in 2008 we had a financial crisis, and who knows, maybe as more things start to default, we will uncover more issues and discover a different form of financial crises.

This is just a reminder post that, even if we do get a bounce, that the warnings signs prior to this drop are eerily similar to 2008 and it might be worthwhile staying a bit cautious with stocks in the near term.

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