S&P500 Following in August 2016 Footsteps

Looking back over historical price action for similar market behavior isn’t something that’s really part of my market homework process, but recently, my mind can’t help but flash back to not that long ago when we were in a very similar, dreary period of chop.

Dial back the clock to less than 6 months ago, highlighted in the blue rectangle above and you can see that the current S&P500 is following the August 2016 market footsteps very closely.

I’m not writing to claim today’s action has to unfold in the same fashion as August 2016, but here’s what this analogy does tell / remind me:

  • Current sideways chop can easily continue longer than we’ve currently seen and there’s no need to be a hero ahead of time.
  • The odds of a sharp spike up in volatility grow greater and greater the longer we persist in this range  (September 9, 2016 down -2.39%).
  • Lots of intraday noise (candle tails)  at the edge of ranges suggest waiting for closing prices (we do this everyday anyway).
  • Do less. Preserve emotional and trading capital.

On Friday January 13th, the note went out to subscribers to start getting very selective with new positions and tightening up existing trades.

A week later and I still agree with that call and am happy to be largely in cash and not forcing new positions.

Much like the current jury duty I am serving this week, there is a lot of waiting going on.

Good luck out there.


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Evan Medeiros

Evan is the founder of the Trade Risk. With 25 years of coding experience and a B.S. in computer science, Evan brings a systematic discipline to investing in the stock market.

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