We have written about the “DNA of the SPX” on several occasions. Below is just a quick reminder:
All bigger pullbacks (10% and more) have been playing out in a similar fashion. The bounce, post every sell off, has ended up with the following move lower revisiting the initial low mark (you can see it as a double bottom). The time period between the first and the second low has lasted around 30 days, give or take a few days (you can read that post here with sell off charts from 2010, 2015, 2016 etc).
The bounce so far has followed the same pattern, although it is getting a bit overheated. The SPX is actually only now reaching the upper Bollinger Band. If the dynamics from the December sell off and the subsequent bounce is to follow the pattern of all previous sell offs (greater than 10%) coming days are extremely important.
Maybe chasing longs here is the right strategy, but we are bothered by the fact both Oil and the JPY have not been buying this last move in the SPX. After all, both these assets are on the top of our global risk indicators. Watch them carefully here.
Source: charts by Bloomberg