Chart of the Day - Thursday, March 5th, 2020

Today’s Chart of the Day was shared on Twitter by Ian McMillan (@the_chart_life). It’s a daily candlestick chart of the S&P 500 index during the 2018-2019 “bottoming process.” After last week’s sell-off, the question many are asking is whether the S&P 500 will retest Friday’s low, or stage a sharp V-shaped recovery like it did in 2018-2019. In case you forgot, the S&P fell 19.78% in Q4 2018, just a few basis points short of bear market territory. Ian points out that the index saw a “gnarly undercut” on the Thursday after the Christmas eve low. Price broke below the lows of the prior three days, leading many to believe that the sell-off was not over and that the index was on its way to retest the lows. Instead, the market gapped higher on Friday and never looked back. While we can’t expect price action to play out exactly as it did in 2018-2019, it’s still worth considering this a potential scenario going forward.