SPX S&P 500 Monthly Chart; Comparing the 2007 and 2018 Stock Market Tops

A look at the current action in the stock market is interesting through the prism of the 2007-2009 fractal. The obscene rally from 2009 to present is central banker-induced and illustrates the demise of free markets and capitalism in America. The Federal Reserve is colluding with all other global central bankers to send stock charts from the lower left to the upper right to reward the wealthy elite class. The world is awash in Keynesian liquidity.

For the last decade, the boatloads of easy money from the Fed and other central bankers pump all asset classes higher including stocks, bonds, real estate, art, vineyards, collectibles, jewelry, antique cars, etc... Of course when confidence is lost in the Fed and other corrupt central bankers, the party ends.

Keystone called both major tops; 2007 and 2018 and we wait to see if the 2018 top and all-time high at SPX 2941 will hold, or not. The S&P 500 is at 2873 only 68 points away from a new record high (another +2.4% is needed).

The October 2007 top occurs with the overbot conditions and universal negative divergence. The stock market fell apart in the back half of 2008 into early 2009. That is when the US government and the Federal Reserve spit on capitalism and bailed out the banks and other companies such as GM and AIG. Obviously, capitalism does not exist. Paraphrasing republican President George W Bush (President Obama was just elected) at the time, he said he had to destroy capitalism to save it. Pause for laughter.

Bailing out banks and companies is the complete opposite of capitalism. People only want the good side of capitalism (where stock prices go up and the economy is strong) but do not want the bad side of capitalism (where stocks collapse and companies go bankrupt). The washing-out of companies is a self-cleansing mechanism and is a major part of the capitalism system. Capitalism is dead in the United States.

America is best described as a faux free market crony capitalism system. After five decades of the wealthy class, which includes the politicians and corporate executives, crushing the middle class by sending jobs overseas, the chickens are coming home to roost. The United States has entered a new Gilded Age a la the 1920's. America is the land of the have's and have not's created by the elite class that control the rigged crony capitalism system.

Alas, nothing will change that. These types of things typically continue until they collapse in riots and social unrest, or war. All government systems in world history have only lasted 200 to 250 years. The systems such as capitalism or socialism do not dictate the outcome. All government systems eventually fail because humans are corrupt. It's not rocket science.

Setting the future political and class war problems aside, the SPX monthly chart is interesting. Price came back up in 2008 after the initial drop off the top. That was a perfect storm back then as the SPX came up to test that confluence of the 10, 12 and 20-month MA's and failed. It was over. The SPX fell from 1450 to 666 (-54%) in the next 9 months to the March 2009 low.

The late September 2018 stock market top occurs with the overbot conditions, rising wedge and universal neggie d. The stock market fell apart in Q4 2018. A key difference between the two tops is that the global central bankers are now colluding to maintain happy stock markets. This was not the case in 2007. Back then, we were on a euphoric high; it was a classic and standard stock market top created by simple human greed.

The Fed, PBOC, BOJ, ECB and other central bankers started printing money like madmen this year shouting this fact from a megaphone. Booiiiinnngg. Stocks catapult higher on the obscene liquidity offerings. When the SPX came back up, it blew up through the moving averages rather than those resistance levels holding. They have now all become support; 10-month MA 2781; 12-month MA 2769; 20-month MA 2724. Serious trouble would appear at 2781 and stocks will collapse under 2769. The SPX needs to show respect to the 10 and 12 with back kisses going forward.

If price comes up for a new record high, watch to see if the chart indicators remain negatively diverged (all indicators remain below the thin red lines in the right margin). If so, the stock market is toast. 

Stocks placed a top in October 2007, that was an epic top, and then the next lower top came in May 2008 about 6 to 8 months after the peak. Back to the present day, the SPX topped-out in late September early October so adding 6 to 8 months places the potential lower top, and beginning of the next stage lower, based on the 2007-2009 fractal, at March-May 2019. We are in this window now.

Remember how Keystone monitored the stock market topping process last year explaining the drama in real-time? The final indicator to roll over with negative divergence was the MACD line. Keystone would always highlight that with a purple circle. The MACD wanted to see matching or more new highs after last September and the month of October began at a matching high and that was enough to create the neggie d on the MACD and create the stock market top, and down she went.

However, since the MACD was very strong, it is not surprising to see price come up strongly off the bottom towards the record highs again. Typically, when this behavior occurs, price would be expected to roll over. There was enough fumes in the gas tank to boost price higher again but likely not enough real liquid gasoline to move it into new high territory. Of course, the central bankers are the gasoline stations that control the rigged financial systems and may step in to add more easy money, er gasoline, at any time. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.