Interesting article for fun from
The violent selloff and subsequent grinding higher feels very unique. Some have even said this market feels “unnatural” or “rigged” due to quantitative easing, high frequency trading, LTRO, ZIRP and other boogie men. I assure you these market conditions are not unique at all. Here are 5 examples of statistically similar markets and what transpired afterwards.
These instances were identified by our pattern recognition algorithm as self-similar in form to the market conditions we are currently experiencing. The requirements for this search was a substantial selloff followed with a choppy bottoming process and a grind higher taking out the previous highs. Spoiler alert: These instances (since 1970) overwhelmingly occur in bull markets and tend to lead to meaningfully higher prices.
For reference sake, here’s where we’re at:
Instance 1:
December 1989 – July 1990
The result is quite bearish:
Instance 2:
Actually embedded in instance 1 (freaky): July 1990 – March 1991
The result: Higher prices
Instance 3:
January 1994 – March 1995
The result: Super bull
Instance 4:
February 2005 – July 2005
The result: A pullback and new highs
Instance 5:
April 2010 – November 2010
The result: This instance is fresh in our minds and most will remember a shallow pullback and higher prices.
Instance 6:
The present
To aid your visualization I’ve included the appropriate negative space for both a bullish and bearish outcome. There is room for both interpretations, but the choice, as always, is up to you.
Bullish:
Bearish:
