With the sell-off in equities in the month of August, the U.S. markets are now mirroring the Japanese sell-off back in 2000. From a technical analysis perspective, the chart below is creepy. It suggests that US stocks could fall a lot more.
We can’t know with absolute certainty whether US stocks will continue to follow a similar pattern. As Barry Ritholtz correctly points out:
Where our Fed stepped up and flooded the system with liquidity, the Japanese central bank did not. Whether that means the US avoided a Japan like decade plus long recession, or merely delayed it, has yet to be determined . . .
Turning Japanese: SPX vs Nikkei Index (10 Year Lag)
The Big Picture
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