The broad bearish seasonal pattern for US stocks runs from late April until October. Sometimes if a top is not made in the April to May zone, a peak could be made in August. Two classic examples of September to October bear moves occurred in 1987 and 2000. These price smashing bear markets could reveal clues for the near future.
The 08/22/20 blog “ Forecast – Bull Market Termination Date – 2021” illustrated a web of Fibonacci time cycles going back to 1932 that targeted a potential major turn in 2021. This cycle was only able to target the year, not when in 2021 a major turn could happen .
The monthly S&P 500 (SPX) chart courtesy of Trading View focuses on the peaks made in 1987 and 2000.
The primary top in 1987 and the secondary peak in 2000 could be forming a Fibonacci – Golden Section targeting a potential August 2021 top.
The daily SPX chart illustrates the infamous August 1987 top.
The late August top was the prelude to a 35.9% decline that lasted only 39 – trading days. Could another crash in the area of 35% happen in 2021? It’s possible, but unlikely because there was a nearly identical size crash just last year. Will lightning strike twice? Probably not, a mini crash is more likely.
The daily SPX chart from 2000 illustrates an example of a mini crash.
In 2000 the SPX formed a double top with the primary peak in March and the slightly lower secondary peak made shortly after the open of trading 09/01/00. The 2000 decline after 09/01/00 was the initial part of a bear market that lasted until October 2002. The September to October 2000 drop was a mini crash and could be a preview of what may happen in 2021.
The next blog will examine the 2015 mini crash.