S&P 500: 5 Eerie Similarities to 2008

11/21/2011 11:42 am EST

Focus: STOCKS

Five different indicators are now flashing ominous signals for the S&P 500, all showing similar conditions to 2008 when crisis broke and the markets collapsed.

When I was looking at some long-term charts, I found out that the current situation for the S&P 500 is very similar to the situation in 2008.

Check out the following chart below and you will see why:

chart
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  • The RSI hasn’t been overbought anymore in a long time, indicating weakness in stock markets. The same was true in 2008
  • The S&P 500 found heavy resistance in the 1260-1280 zone (just as we warned our subscribers), which was the low of June 2011. A similar thing happened back in May 2008, when price ran into resistance of the November 2007 low
  • Look at the exponential moving averages (20, 50, 100 and 200 EMAs). They have now been converging as price rallied, but right now, price is falling below these EMAs, just like in late-May 2008.
  • The MACD indicator is now flirting to break the green support line, just like in May 2008, right before financial armageddon occurred, and price is right at the green support line now, just like in 2008.
  • The Ted Spread, which is the difference between the interest rates on interbank loans and on short-term US government debt (“T-bills”) is rising. This indicates that the banks don’t trust each other anymore. The same thing happened in 2008.

chart
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One positive thing, however, is that when we look at the big picture, we are nowhere near the 2008 highs (yet):

chart
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By Willem Weytjens of Profitimes.com

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