Technical Update - Russell 2000 and S&P 500 are drawing patterns similar to 2007-2008 Technical Update - Russell 2000 and S&P 500 are drawing patterns similar to 2007-2008 Technical Update - Russell 2000 and S&P 500 are drawing patterns similar to 2007-2008

Technical Update - Russell 2000 and S&P 500 are drawing patterns similar to 2007-2008

Equities 3 minutes to read
KCL
Kim Cramer Larsson

Technical Analyst, Saxo Bank

Summary:  The Financial Crisis in 2007-2008 was different compared to the one currently unfolding, but the market reaction is similar. Russell 2000 small cap and S&P 500 are forming technical pictures identical to 2007-2008. If the Equity market continues to react as it did in 2008 there is much more trouble ahead for Equities.


Russell 2000. Is it 2007-2008 all over again?
It certainly looks that way. Below are two weekly charts of the Small Cap Index Russell 2000 with weekly Simple Moving Averages (MA) added. Orange line is 21 MA, Blue is 55 MA, Pink is 100 MA and Red is 200 MA.

The first chart is from 2007-2008. The second from 2022-2023.
If we start by looking at the movement of the Index it itself i.e., without paying attention to Moving Averages the movements are almost similar 2007 vs 2022. The trends and corrections are similar.

Comparing the movement of the Index then and now they are almost identical. 21 MA has dropped below 55 and 100 and has moved up and down around the 200 MA.
55 MA has crossed over 100 and 55 is close to cross over the 200 MA. That is quite a few Death Crosses.
Twice has Russell 2000 failed to break above 100 MA only be sent back below the 200 MA as it did back in 2007. Russell 2000 could be on the verge of a massive sell-off. If it closes below 1,641 that could very well be the scenario.


Russell 2000 2007-2008:

Source all charts and data: Saxo Group
Russell 2000 2022-Present

Russell 200 has broken bearish out of its rising channel like pattern and seems set for lower levels. 
Key support at around 1,641. If that is taken out there is no strong support until around 1,460.

IF Russell 2000 is to drop as much as it did back in 2008, which was +40%, the Index would be back to the Pandemic scare trough March 2020.
For this Bearish scenario not to play out a close above 2,000 is needed. 

S&P 500
Similar behaviour in S&P 500. Again first chart is from 2007-2008. The second from 2022-2023. 
21 MA below 55 and 100 but still above 200 MA – for now. 21 Ma below 55 and 100 MA’s. S&P is below 55 and 100 MA.
IF S&P 500 and the 21 MA close below the 200 MA that could be the signal for lower Index levels.

S&P 500 2007-2008:

S&P 500 2022-Present:

If S&P 500 closes below 3,764 next support is 3,509 and 3,210.
Short-term it was rejected at the short term falling trend line twice and is still in a downtrend. If closing below 3,800 the bearish scenario is likely to play out. 
To demolish the bearish scenario similar to 2007-2008 a close above 4,200 is needed.

Author is holding a short position in Russell 2000. This is not a recommendation to buy or sell.
Disclaimer

Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000
Australia

Contact Saxo

Select region

Australia
Australia

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-au/about-us/awards

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.