I want to take a look at the structure of the S&P 500 just prior to the GFC crash. It does bear some resemblance to the structure we are in now. You will have seen this comparison going around.
We can distinctly see a bullish wedge today:
And we could see one then, too:
Now, the differences are clear: it was absolute mayhem back then (I was trading then, though we communicated more on the phone and with Yahoo! Messenger rather than on social media too much). The defaulting mortgages were racking up, etc. etc. It was a catastrophe.
Now, on the chart, I have pointed to the red candle that came on the day Lehman filed for bankruptcy. And you have to imagine just how bad that was. They were really really big. But, note that we didn’t even crash right away from that. We first had a huge short squeeze, over 13% in two days!. The rally we just had from the 5/20 low was 10% in a week.
So, 1) we have seen nothing like a big bank failing, and 2) even if we had, I would still want to look for a big squeeze before the rugging. So, though dark counts are absolutely possible, I would rather see some other ingredients first. Some really bad news and a big squeeze for starters.
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