TALKING TECHNICALS: Up the stairs, down the lift
Increased volatility goes hand in hand with spikes and corrections
The sharp sell-off on global equity markets in October was rather brutal. It was the second such sell-off of the year. The first happened in January and February, making for a volatile first quarter. The second and third quarters were calmer for equity markets, as can be seen in the chart of the S&P 500. The start of the fourth quarter saw another sharp correction, equal in magnitude to the drop-off in the first quarter. Both corrections in Q1 and Q4 were about 10% in magnitude. Both were quick and aggressive. The saying "The bull climbs up the stairs and the bear goes down the elevator" was true in both these corrections.
What is notable about the most recent 10% correction is that it has left more technical damage in its wake. The upward trend that was evident through 2016, 2017 and most of 2018 has been broken to the downside. When technical damage of this significance occurs, it is worth paying attention to as it indicates that the typical strategy of buying every dip in a...
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