Let's take a look at a few charts.
Remember, earlier this week we looked at this valuation chart on the S&P 500 (from FactSet) …
This latest peak in the forward P/E was October 29th. And as we dicussed, a forward P/E above 23 has happened only one other time on this chart — September 2, 2020.
On that day in 2020, stocks started a sharp 10% correction that spanned just 15 days, peak-to-trough. And that correction came after the 65% rise over the preceding six months.
Given that valuation backdrop, we talked about the set up for a technical correction for stocks.
With that, let's take a look at the price chart of the S&P 500 …
The high was marked on October 30th, a day that also resulted in a classic technical reversal signal (a bearish outside day – a session with a higher high and lower low than the prior day, closing near the low). And today, we test this big trendline support which comes in from the "tariff-shock" lows of April.
We have a similar chart in the Nasdaq.
In this case, it's been a 60% rise over a six month period (echoing the 2020 analogue). And we get the bearish outside day, at the top, and now the challenge of this big trendline.