Sunday , 25 June 2017


S&P 500 Likely to DROP to 1740 Soon! Here’s Why

Right now the monthly chart of the S&P 500 Index (SPX) is crying out — screaming,stockcrashimages-1 even — for a 38.2% retracement to 1740. Here’s why.

The above introductory comments are edited excerpts from an article* by David Nichols (fractalgoldreport.com) as posted on Safehaven.com under the title Special Report: The 64-Month Pattern in Stocks and Gold.

Nichols goes on to say in further edited excerpts:

One of the foundations of market movement is the golden spiral, built on the familiar fibonacci relationships of 61.8% and 38.2%. Natural systems develop along these fibonacci ratios for the simple reason that they are infinitely scalable in both directions — they can get smaller and larger in identical ratios, which is a defining characteristic of fractal systems like markets. They have to have these scaling factors built in.

The figure above shows a golden spiral, which is a special version of a logarithmic spiral. The key thing to notice on this golden spiral is that the curving spiral line reaches the end of its rectangular segment and then curves back precisely 38.2%. It then does this again on a smaller scale — or on a larger scale — depending on which direction it is going.

After a trend that has reached its conclusion, as a market shifts to seek equilibrium, it moves inward along this same golden spiral path, which invariably leads to a 38.2% retracement of the preceding trend.

The energy for this 38.2% retracement is built-in to every market trend. It is not something separate that exists on its own — instead it is part of normal market movement, as it is the counter-energy that releases after the primary trending energy has reached its maximum point.

Right now the monthly chart of the S&P 500 Index (SPX) is crying out — screaming, even — for a 38.2% retracement.

Never in modern market history has a pattern extended like this. There have been plenty of extensive, multi-year rallies, but they have all ended with a hard retracement, or an outright bear market. This pattern will finish with a 38.2% retracement as well, as the counter-energy for this move down is already embedded within the pattern.

The most pertinent historical example is 1987.

Right now SPX 1740 is the likely target for a hard retracement. This 1740 area seems like a long way down now that the SPX is creeping around the 2000 level. It also seems inconceivable that a market pattern showing such consistent, grinding gains — with such low volatility — could drop 250 points or more in such a short time but it’s easy to forget that SPX 1740 was the low only 7 months ago.

There is major precedent for a market pattern to “up-chuck” the last 8 months of gains during a hard retracement. In fact, we saw just this phenomenon at the Aug 2011 top.

This was also the case during the 1987 crash. It seemed like a huge move — it was a huge move — but it was mainly just a reaction to the outsized and unstable uptrend that directly preceded it.

I bring this up because a window is blowing wide open for this same thing to happen from late September to early November 2014. There has even been a similar run-up right now to the pre-crash period in August 2011, with a 119 trading day rally setting the stage for the instability to follow.

There are a couple of things to notice about the pattern from 2011. The unstable period that followed this 119 day rally included some fierce upside blow-off moves, very similar to what we’re seeing now. This is the “clear-the-decks” phenomenon where both sides of the market’s order book get blown out.

So even though 1740 is directly in the picture over the next few months, it doesn’t preclude the market from going higher during one last paroxysm of buying. This would be every last short getting taken out before the drop.

The bottom line is it looks extremely likely the SPX will be dropping to 1740 at some point in the near future, but there is still an unanswered question about how high the shorts will get squeezed prior to that drop.

Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.

*http://www.safehaven.com/print/35456/special-report-the-64-month-pattern-in-stocks-and-gold (Copyright © 2008-2014 Fractal Gold Report. All Rights Reserved.)

If you liked this article then “Follow the munKNEE” & get each new post via

Related Articles:

1. Confirmed Hindenburg Omen Says 23.5% Probability of -15%+ Stock Market Crash; 61.7% Chance of +5% Decline

No stock market crash (a decline greater than 15%) has occurred over the past 30 years without the presence of a Hindenburg Omen except on one occasion (the mini-crash of July/August 2011). As such, without an official confirmed Hindenburg Omen, we are pretty safe from experiencing a major stock market correction. On the other hand, if we have an official Hindenburg Omen, then a critical set of market conditions necessary for a stock market crash exists. As of September 19th, 2014, we have such a condition in the market… Read More »

2. “Is the Stock Market Sitting On A Trap Door?” These 2 Indicators Say “Yes”

The Russell 3000, a broad equity index representing 98% of the investable U.S. stock market, is up 9.3% for 2014 on a total-return basis…[but] the median total return for Russell 3000 constituents is just 1.5% reflecting the fact that small- and mid-cap stocks are under-performing… This current alarming deterioration in breadth, a term that refers to how much of the market is participating in the advance, begs the question: “Is the stock market sitting on a trap door?” This article looks at 2 trap door indicators that suggest that that might, indeed, be the case. Read More »

3. Take Note Because Those Investors Who Ignore These Observations Do So At Their Great Peril

Is a major top at hand? It is often said that bells do not ring to signal the end of a bull market but if the broad averages were in fact to plummet in the weeks ahead, never forget that bells did indeed ring. This article contains the opinions of three heavyweights in the guru world which are so insightful that any investors who ignore their observations do so at their great peril. Read More »

4. What Does the 10-year Yield’s Death Cross Mean For Stocks?

The 10-year yield’s Death Cross has proven to be a pretty significant risk-off shot across the bow over the last decade and this matters today because the 10-year yield put in a Death Cross back in early April of this year. So what does the 10-Year’s Death Cross mean for stocks this time? Read More »

5. Financial Asset Values Hang In Mid-air Like Wile E. Coyote – Here’s Why

The financial markets are drastically over-capitalizing earnings and over-valuing all asset classes so, as the Fed and its central bank confederates around the world increasingly run out of excuses for extending the radical monetary experiments of the present era, even the gamblers will come to recognize who is really the Wile E Coyote in the piece. Then they will panic. Read More »

6. Look Out Below? Buffett Market Indicator Has Now Surpassed 2007 Level

Market Cap to GDP is a long-term valuation indicator that has become popular in recent years, thanks to Warren Buffett and it is now at the second highest level in the past 60 years – even surpassing the levels reached in 2007. Read More »

7. World’s Stock Markets Are Saying “Let’s Get Ready to Tumble!”

To ignore all the compelling charts and data below would be irresponsible and, as such, will NOT go unnoticed by institutional investors. Such bearish barometers for stocks worldwide will, unfortunately, be ignored by the ignorant and gullible hoi pollo causing them severe financial loss as investor complacency in the past has nearly always led to a stock market crash. Read More »

8. Stock Market Bubble to “POP” and Cause Global Depression

In their infinite wisdom the Fed thinks they have rescued the economy by inflating asset prices and creating a so called “wealth affect”. In reality they have created the conditions for the next Great Depression and now it’s just a matter of time…[until] the forces of regression collapse this parabolic structure. When they do it will drag the global economy into the next depression. Let me explain further. Read More »

9. It’s Just A Matter Of Time Before the Stock Market Bubble Is Pricked! Here’s Why

Once again the stock market is in full bubble mode. The market was already overvalued earlier this year and the froth continues to build. Valuations are off the chart and euphoria is setting in while, at the same time, you have inflation eroding the purchasing power of regular Americans not participating in this casino. All the signs of a bubble top are there – massive speculation, unexplainable valuations, and blind optimism – even though the fundamentals don’t make any sense. This article substantiates that contention. Read More »

10. Coming Stock Market Enema Will Be A VERY Messy Occasion!

Who knows how long before the Dow Jones Index finally receives a well overdue market enema, but I can assure you of this, when it arrives it will be a VERY messy occasion! Read More »

11. History Says “Expect An Economic Crash AGAIN In 2015″ – Here’s Why

Large numbers of people believe that an economic crash is coming next year based on a 7-year cycle of economic crashes that goes all the way back to the Great Depression. Such a premise is very controversial – some of you will love it, and some of you will think that it is utter rubbish – so I just present the bare bone facts below for you decide for yourself if it is something to seriously consider protecting yourself from in 2015. Read More »

12. This Weekend’s Financial Entertainment: “A Stock Market Crash IS Coming!”

Our financial system is in far worse shape than it was just prior to the financial crash of 2008. The truth is that we are right on schedule for the next great financial crash. You can choose to ignore the warnings if you would like but, ultimately, time will reveal who was right and who was wrong and, unfortunately, I think I will be proven to have been right. Read More »

13. Present Bull Rally In Stocks Dangerously “Beyond the Pale” – Here’s Why

It is frighteningly clear to any objective analyst and/or intelligent investor that the present bull market rally in stocks (2006-2014) is “beyond the pale” (outside the bounds of acceptable behavior) i.e. the excess valuation is dangerously above the market excesses of the 1920s. Read More »

14. We’re All Cued Up For A Bear! Here’s Why

When taking a step back and viewing longer-term gauges, we see warning signs flashing. Many of these readings are in extreme territories, and historically bear markets have occurred from such overbought positioning. We are all cued up for a bear! Read More »

15. SELL! U.S. Stock Market Is An Investor’s Nightmare – Here’s Why

The stock market is presently a roulette wheel with dimes on black and dynamite on red. We continue to have extreme concerns about the extent of potential market losses over the completion of the present market cycle. Read More »

16. Harry Dent: Get Into Cash – Stock Market Will Crash to 5,500-6,000 By 2017!

You have to get out of stocks. Stocks have bubbled again and when they go down they’re going to go down hard. Read More »

17. Coming Bear Market Could Turn Into A Historic Crash – Here’s Why

Amazingly, we are on the verge of a global deflationary downturn and what could be a historic bear market, yet Wall Street prognosticators remain focused on the inflationary risks of excessive monetary stimulus. Their focus could not be more wrong. Let me explain further. Read More »

18. Take Note: A Bubble Isn’t Necessary To Have A Sharp Decline In Stocks

With valuations stretched, investors seem to be justifying their stock purchases here with the argument that we have yet to reach the mania of 1999-2000 but history has shown us that there doesn’t have to be a bubble for there to be a sharp decline in stocks. As we saw in 2007, it doesn’t mean there is no risk of a significant market decline or that valuations are compelling and that investors should be expecting above average long-term returns from here. They should not. Read More »