4 Temmuz 2022

Jason Sen

Dreaded death crosses on the S&P 500, Dow, Nasdaq and DAX tell us that a crash is imminent.

In 2008 I correctly predicted a stock market crash based on a big head-and-shoulders pattern and a break below the blue 100-week moving average on the E-mini S&P 500 weekly chart (see below).

Note how the red 200- and the green 500-day moving averages worked well as support and resistance as the decline evolved.

Once the 500-day moving average was broken (after the Lehman crisis) the crash accelerated, but we were already in a bear trend so this was not a surprise. If it was not the Lehman collapse there would have been another trigger. The market was already set up to crash.

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I predict another stock market crash is imminent.

As we all know, the US stock markets have experienced an unprecedented rally since the low of the crash in 2009, with the E-mini S&P 500 more than quadrupling in nine years.

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In 2018 we have seen the E-mini S&P 500 form a larger head-and-shoulders reversal pattern, and it now trades well below both the blue 100-week moving average and, more importantly, the neckline of the head-and-shoulders pattern.

That both have very clearly been broken is an important sell signal.

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The daily chart shows the E-mini S&P 500 breaking well below the green 500-day moving average this week. Note two bearish death cross sell signals, as the 55-day moving average crosses beneath the blue 100- and the red 200-day moving averages.

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There could hardly be a more negative outlook for the E-mini S&P 500. There is a serious risk of further significant moves to the downside and momentum is likely to accelerate to the downside.

The E-mini Dow Jones weekly chart shows a break below the neckline and Fibonacci support to test the 100-week moving average at 23500. Although we are becoming oversold on the Slow Stochastic Oscillator I would be surprised if this was the end of the correction. We would have to sustain a move back above 24500 for me to be proved wrong.

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The E-mini Dow Jones daily chart also shows two death crosses as the 55-day moving average crosses below the blue 100- and red- 200 day moving averages.

We have held just above the green 500-day moving average for a small recovery but a break below 23300 acts as the next significant sell signal. I do not think we will have to wait too long for this signal.

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Not to be outdone, the Nasdaq weekly chart also shows the price testing the neckline of its very own head-and-shoulders reversal pattern. As I write, this is holding as we bounce from the 100-week moving average at 6420. Once 6400 has broken, further stop losses are likely to be triggered, signalling the start of another leg lower and the start of a bear market.

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The Nasdaq daily chart also features two death crosses to confirm the negative outlook and a clear bear trend. The green 500-day moving average at 6370 is the only apparent support. Although this has held for now, a break below 6350 will be another sell signal and there will be little to stop the market accelerating to the downside as panic sets in.

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Germany’s DAX 30, meanwhile, completed a head-and-shoulders sell signal two weeks ago and declines have followed as predicted. Note the 55-day moving average crossing below the 100-day moving average in another death cross formation. Holding below 11000/11100 last week confirms the negative outlook.

If the stock markets do not crash next year I will be shocked.

Jason Sen

Technical Analyst & Trader

For more information and trading education visit InterTrader

The content of this article is the personal opinion of the author and not InterTrader. You should under no circumstances consider the information and comments provided as an offer or solicitation to invest. This is not investment advice. The information provided is believed to be accurate at the date the information is produced.

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