S&P Futures Flashback: Are We In for a Major Drop?

The charts are setting up the same way they did two years ago ahead of a triple-digit drop in the S&P 500.

   

Video Transcript

On the chart in the video, I show you the last time we had an outside bearish reversal (OBR) in the S&P 500 futures in April 2011. Fast forward to a couple months later when the market starts heading into the summer; what happened? Standard and Poors downgraded the U.S. credit rating, and we dropped from 1350 all the way down into the 1060s, more than 300 points.

That was incredible, and the crazy thing is, two years later right now, the exact same chart and exact same everything are appearing. If you try to draw parallels, it’s difficult because it’s not a very common occurrence to get an outside bearish reversal at new highs in the S&P 500 futures. Otherwise, I wouldn’t be talking about it if it happened every single day.

Now, you can get an outside bearish reversal when you’re in a downtrend. You can get outside bullish reversals when you’re in an uptrend, but it’s very rare to get an outside bearish reversal at new highs. Think of the euro; why is bouncing right now? Because last week, it made an outside bullish reversal at new lows, and then it’s just kept going up.

I’m watching this closely, and while I think the market will meander in the near term, the charts seem to be telling us that a bigger drop could be coming.

InvestorPlace advisor John Lansing tracks the charts all day and offers expert technical analysis in his day trading, options and trading services: Power Trading at the Open, Parabolic Options and Trending123.  For more information on which service is for you click here.


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