The Dotcom Bust in 2001 vs. SPY or SPX in 2022 - Updated
This is an update to a previous idea I've been mooting.
This is a deeper dive and follows up with some additional charts.
Firstly, an introduction.
The bearish diamond reversal is a vary rare technical analysis form.
Diamond forms form either bottoms or tops, depending upon relative positioning and are relatively concrete signs of imminent reversals.
The "classic" example of a bearish diamond reversal is the Dotcom crash in the year 2001 on the NASDAQ100 ETF.
Some analysis of this follows with a comparison to SPX / SPY in 2022.
The form of a diamond reversal in the bearish form consists of a high, a low, a higher high, a lower low and then a return to the previous midline-high.
We can see this here in the form of the Nasdaq 100 during the Y2K reversal.
Furthermore, the form here displays a clear bias towards specific shapes.
For instance, here we can see the pseudo-head-and-shoulders form in fig.1 coupled with an "m" shape which appears to be a very messy bear flag in fig 2.
On SPY, we have a very similar diamond form unfolding with a similar "high-low-higher high-lower low" type progression.
We will have to wait and see what happens here, but so far the form is very similar to the diamond reversal which unfolded in the year 2000.
Here's a direct comparison.
So we can see Fig.1 across both indexes & timeframes bears a very strong direct similarity from points A to D.
Even though we are looking at two different indexes across two very different points in time we still have a very similar shape emerging on the charts.
The question mark remains in Fig 2.
I suggest watching this closely in the coming weeks for either a resolution or an invalidation of this form.
If we continue to follow the form of the Year 2000 diamond reversal, then I would suggest the following chart as a projection of how things may unfold.
Watch carefully over the coming weeks because the point we are at now corresponded to the Jun 2000 - October 2000 on Nasdaq at the turn of the century. This means a market cycle of about 110-120 days.
We began this part of the cycle in March and therefore the months of July/August will be key if we assume a similar timeframe of development going forwards.
Watch out for Fig.2. completion over the coming weeks.
Invalidation of this form would see the price move above the 4800 mark because that's what it would need for the market to continue.
Additionally, there is a very bearish outline occurring on VNQ real-estate ETF and I include a link to that in the related ideas section.
This is a deeper dive and follows up with some additional charts.
Firstly, an introduction.
The bearish diamond reversal is a vary rare technical analysis form.
Diamond forms form either bottoms or tops, depending upon relative positioning and are relatively concrete signs of imminent reversals.
The "classic" example of a bearish diamond reversal is the Dotcom crash in the year 2001 on the NASDAQ100 ETF.
Some analysis of this follows with a comparison to SPX / SPY in 2022.
The form of a diamond reversal in the bearish form consists of a high, a low, a higher high, a lower low and then a return to the previous midline-high.
We can see this here in the form of the Nasdaq 100 during the Y2K reversal.
Furthermore, the form here displays a clear bias towards specific shapes.
For instance, here we can see the pseudo-head-and-shoulders form in fig.1 coupled with an "m" shape which appears to be a very messy bear flag in fig 2.
On SPY, we have a very similar diamond form unfolding with a similar "high-low-higher high-lower low" type progression.
We will have to wait and see what happens here, but so far the form is very similar to the diamond reversal which unfolded in the year 2000.
Here's a direct comparison.
So we can see Fig.1 across both indexes & timeframes bears a very strong direct similarity from points A to D.
Even though we are looking at two different indexes across two very different points in time we still have a very similar shape emerging on the charts.
The question mark remains in Fig 2.
I suggest watching this closely in the coming weeks for either a resolution or an invalidation of this form.
If we continue to follow the form of the Year 2000 diamond reversal, then I would suggest the following chart as a projection of how things may unfold.
Watch carefully over the coming weeks because the point we are at now corresponded to the Jun 2000 - October 2000 on Nasdaq at the turn of the century. This means a market cycle of about 110-120 days.
We began this part of the cycle in March and therefore the months of July/August will be key if we assume a similar timeframe of development going forwards.
Watch out for Fig.2. completion over the coming weeks.
Invalidation of this form would see the price move above the 4800 mark because that's what it would need for the market to continue.
Additionally, there is a very bearish outline occurring on VNQ real-estate ETF and I include a link to that in the related ideas section.
