April Fools

‘Fools rush in where angels fear to tread’ - Alexander Pope

Here we are on the morning of ‘Liberation Day’ and it really does look as though the Trump Administration is planning to launch a trade war against the rest of the world today. I understand that is scheduled for 4pm EST this afternoon as the RTH market closes.

If Trump is right then, unlike any other instance where tariffs have been imposed in history, US trading partners will absorb the cost of tariffs and in effect the tariffs will be a tax on those trading partners for the privilege of trading with the US, while the decreased competitiveness of imports, even though those import prices will not have risen, will rebuild the US manufacturing base.

Personally I don’t believe any of that is at all likely, and that instead there is a high probability that these policies, sustained for anything more than a brief period, may lead to a very deep recession in the US, and turmoil in equity, bonds and currency markets over the next few months. We'll see how that goes.

This is the third in my series of posts this week looking at the likely impact of the proposed large expansion of tariffs scheduled to happen today.

In my first post Monday night, Brave New World, I was looking at the economic reasons why I think that the planned tariff war on the world due to start tomorrow may have a very serious economic impact, particularly on the US economy.

In my second post yesterday, Four Bear Markets and a Setup, I looked at the last four big bear markets / crashes on SPX, and put the case for that happening again here, and projected an ideal path for that bear market to take.

Those first two posts were on my The Bigger Picture substack as that’s generally more appropriate for bigger picture posts.

In this third and last post of the series on my main substack, I’m looking at the secular bull market patterns and fibonacci retracement levels on NDX, DIA and IWM from the low in 2009, and looking at the more likely targets and the ideal paths to get to those targets.

I decided to use NDX rather than QQQ for this analysis as the trendlines were clearer.

On the weekly chart NDX has already broken the rising wedge from the Oct 2023 low and reached the initial double top target. Looking lower there are two obvious possible H&S necklines in the 17450 and 17000 areas and either would be a decent match with the possible H&S neckline on SPX in the 5100 area.

The higher neckline would look for an ideal right shoulder high in the 20600 area and the lower in the 18500 area and on subsequent sustained breaks below the respective necklines the target would either be in the 12700 or 11550 area.

NDX weekly chart - 2019-date with bear market projections from here:

Looking at the monthly log scale chart from 2000 to date I had a couple of options for the resistance trendline on the NDX secular bull market pattern, but my working assumption is now that the one shown on the chart below is likely the correct one. It is worth noting though that the rising support trendline is closer on NDX than it is on any of the other three and will therefore likely break first, and possibly will be the only one to break in the moves I am projecting.

If these secular pattern support trendlines start to break that raises a serious possibility that the secular bull market from the low in 2009 has topped out after sixteen years and, for reference, the last secular bull market from the low in 1982 lasted for eighteen years into the 2000 high, with the SPX secular bull market rising channel then breaking down in early 2001. This current secular bull market has lasted sixteen years from the low in 2009.

The first big support level is at rising wedge support, currently in the 16000 area but if we see an H&S form and break down through that then the ideal target would be the 50% retracement of the bull market in the 11600 area, and that is a very close match to the H&S option with the neckline in the 17000 area.

NDX monthly (LOG) chart - 2000-25 secular bull market pattern:

On DIA there is a clear and high quality rising wedge from the 2020 low, and the initial double top target is in the 382 area. If reached then that is close to a possible H&S neckline in the 380 area, and if we see that hit and a right shoulder form in a rally from there then the ideal right shoulder high would be in the 410 area. A subsequent break back below the neckline and the rising wedge support trendline, then likely to be in the neckline area, the target would be in the 310 area, very close to the 50% retracement of the rising wedge from the 2020 low.

There is a possible alternate lower H&S neckline option in the 370 area. If reached the ideal right shoulder high would then be in the 395 area and the ultimate target in the 290 area. This is the alternate because the higher option would likely be a better fit with the H&S scenarios on SPX and NDX and the target is a better retracement target.

DIA weekly chart - 2019-date with bear market projections from here:

On the weekly log scale chart there is a good quality rising wedge from the 2009 low with rising support now in the 304 area and, very possibly by the time that is hit, also a good match with that 310 target. If a low was made there then, as with SPX, the secular bull market pattern need not break down to make the ideal target area.

DIA weekly (LOG) chart - 2005-25 secular bull market pattern:

IWM is a harder chart to call, in part because the move up on IWM has formed very differently from the others. There was an initial rising megaphone from the 2020 low into the highs in 2021, but that retraced hard afterwards and the move up from the 2022 lows barely did more than retest the 2021 high.

The H&S pattern from the highs is in the 184 area and I’m expecting that to be hit, there’s no obvious compelling larger pattern option that may form here but then there’s no need for one, as there is already a large and good quality double top pattern with double top support in the 156.63 area. If that pattern was to break down and reach target the first target would be a retest of the 2020 low at 89.52, with an extension target in the 78/9 area.

IWM weekly chart - 2019-date with bear market projections from here:

Looking at the monthly log scale chart there is a decent quality rising channel from the 2009 low with rising support currently in the 153 area and rising towards double top support at 156.63.

I’m wondering if IWM might hold that level though. There is the rising channel support in the area of course but there is also a very strong looking support range 156-160 with the 2018 high at 159.10, the 2020 high at 159.37 and then four significant lows in the 156 to 165 area in 2022-3. That area might hold.

If that support breaks then I’d still be skeptical about seeing those double top targets reached and would be watching for possible support at the 50% retracement level at 135 or the 61.8% retracement level at 110. Both of those are at decent established support levels.

IWM monthly (LOG) chart - 2000-25 secular bull market pattern:

My working assumption here is that the tariffs scheduled to be announced today will be announced and applied. There currently seems to be strong conviction from the administration that they would hold through any short term pain in the expectation that the pain would soon pass. I’m very doubtful about that pain doing anything but increase before the tariffs are lifted but I could be mistaken.

What is obvious here though is that even if the overall secular bull market patterns are going to hold or possibly evolve into larger patterns then we would have been looking for a significant high here, as I was when I was looking at all the short term topping patterns on SPX, QQQ, DIA and IWM in my post on 19th February. Whatever path we take towards those secular bull market pattern support trendlines from here, they will still look like the obvious next targets regardless of what happens with tariffs today.

As I have been since the start of 2025 I’m still leaning on the bigger picture towards a weak first half of 2025 and new all time highs later in the year, very possibly as a topping process for a much more significant high. One way or another I think we’ll be seeing lower soon and I’m not expecting this to be a good year for US equities, not least because both of the last two years have been banner years for US equities. A third straight year of these kinds of gains looks like a big stretch. I could of course however be mistaken. UPDATE 11th March 2025 - I am wondering if this may be a bear market that dominates the whole of 2025.

If you like my analysis and would like to see more, please take a free subscription at my chartingthemarkets substack, where I publish these posts first. I also do a premarket video every day on equity indices, bonds, currencies, energies, precious commodities and other commodities at 8.45am EST. If you’d like to see those I post the links every morning on my twitter, and the videos are posted shortly afterwards on my Youtube channel.

Four Bear Markets and a Setup

As I’ve been working on my post today to look at downside patterns on US equity indices I have realised that this too needs to be split into two posts, so this first TA post will just look at the historical and very compelling current setups on SPX, while the second post will also look at the current setups and targets on QQQ, DIA and IWM.

In my last post overnight, Brave New World, I was looking at the economic reasons why I think that the planned tariff war on the world due to start tomorrow may have a very serious economic impact, particularly on the US economy.

In this post I am looking at last four big bear markets / crash setups on SPX and how they played out, and looking at the setup and targets currently on SPX if we are about to see something similar play out here, as I think we well might.

My next post, entitled April Fools, which will be posted at my chartingthemarkets substack, hopefully tonight, will be looking at the setups and downside targets on QQQ, DIA and IWM in the event that we are looking at a bear market /crash scenario here.

Firstly I’d like to look at the last four big bear markets on SPX that are often referred to as crashes and dispel any idea that these occurred in a pattern vacuum or were wholly unexpected or chaotic. Personally I think that the word crash is very overused and rarely appropriate from a TA perspective in relation to equity indices on a longer term view. This is important as I am putting forward a scenario here and now on SPX that would be similar, and might also be called a crash in the future, but in truth I would just see all of these as deep bear markets, or on the bigger picture even bullish retracements, with the possibly arguable exception of the COVID crash in 2020.

Looking at the 1987 crash, generally portrayed as unexpected and chaotic, it is clearly anything but. It was sudden and fast for sure, but there was a great pattern setup going into it and the only thing it was missing was a good topping pattern.

What it had was a lovely rising megaphone that was clearly topping out, clear negative divergence on the weekly RSI 14, and the decline was an almost perfect 50% retracement of the move up from the 1982 low to the 1987 high.

On the bigger picture this was very much just a sudden bullish 50% retracement.

SPX weekly chart - patterns 1980-7:

Looking at the post 2000 bear market, also generally referred to as a crash, there was a nice rising megaphone leading into it, a high quality H&S that formed and reached target, clear negative divergence on the weekly RSI 14, and the decline was an almost perfect 61.8% retracement of the move up from the 1990 low to 1987 high while forming a high quality falling channel. Really nothing chaotic on this chart at all.

I don’t have room today to show the weekly log chart showing the lovely secular bull market channel 1982-2000 but it was also a very nice high on that chart too.

SPX weekly chart - patterns 1990-2003:

The whole period 1997-2011 was in retrospect a range trade with the bottom of the range in the 750 area and the top of the range in the 1550 area, and the pattern from the 2002 low to 2007 high was a rising wedge that was then entirely retraced into the last test of the range low.

Again there was a very clear rising wedge that topped out in 2007 with an initial double top with a target in the 1170 area, then a larger H&S with a target in the 835 area, a falling channel from the 2007 high that failed lower hard, clear negative divergence on the weekly RSI 14, and the decline was an almost perfect full retracement of the move up from the 2002 low to 2007 high. Really nothing chaotic on this chart at all either.

SPX weekly chart - patterns 2002-9:

Even in the case of the COVID crash in 2020 the pattern setup was clearly strongly suggesting at least a significant high in the rising megaphone from the 2011 bear market low, clear negative divergence on the weekly RSI 14, and even though the decline was really fast, there was a rally to set up the right shoulder on a decent quality H&S that then played out to target in the 2280 area. The decline was close to the 50% retracement of the rising megaphone. It was very sudden and fast but, as all these four were, also very technical in the way it delivered and where it ended.

SPX weekly chart: - patterns 2008-20:

So what about now? I mentioned 5100 as an area I’m watching in a post last week that is an important waystation on the path I have in mind for a serious bear market here. As ever these projections don’t have to play out, but this one is a peach.

Obviously, as with the previous four, we have clear negative divergence on the RSI 14. A small double top has broken down from the highs and on this scenario SPX is on the way down to the possible H&S neckline in the 5100 area near the 50% retracement of the rising wedge from the Oct 2023 low. Ideally there would then be a right shoulder rally into the 5650 area, followed by a break down with a target in the 4100 area, at the full retracement of the rising wedge from the October 2023 low, and the 50% retracement of the move up from the 2020 low.

Is this projection just too mathematically elegant to play out? I guess we’ll see, but I really like it. The current US administration in my view is working very hard to make this scenario happen so I think it has a decent shot.

SPX weekly chart - 2015-date with bear market projections from here:

The elegance of this scenario doesn’t end with that chart though. Secular bull markets on SPX also tend to develop high quality patterns on the log scale charts, and I have a lovely rising wedge here from the 2009 low.

On this secular bull market chart the next obvious target would also be in the 4100 area towards the end of 2025 at rising wedge support, and that would further be a 38.2% retracement of the move up from the 2009 low.

If there was a further decline from 4100 then I have marked in a possible lower target in the 3400 area, at the 50% retracement of the move the 2009 low and the very strong support/resistance area at the 2020 high at 3393, and the 2022 (technical bear market) bullish breakout backtest at 3401.

Either of these two targets would be a model of technical perfection and you most definitely read it here first :-). Would a move to either of these targets constitute a crash either in my view? No.

SPX weekly (LOG) chart - 2000-25 secular bull market pattern:

If you like my analysis and would like to see more, please take a free subscription at my thebiggerpicture substack, where I publish these posts first and do bi-weekly videos looking at equity indices, bonds, currencies and commodities. If you’d like to see those I post the links on Wednesday and Sunday evenings on my twitter, and the videos are posted on my Youtube channel. The follow up post to this post looking at possible downside targets this year on QQQ, DIA and IWM if we see serious market disruption will be posted at my chartingthemarkets substack.