Heading into trading on September 16, 2015 the S&P 500 was 14 trading days removed from the August 25 low. From a trend perspective, how does the current market compare to past market bottoms, assuming we examine those charts 14 trading days after a low or retest of a low?

Our objective is to compare today’s market to favorable and lower volatility entry points that followed past market corrections. If a market bottoms, but remains highly volatile for six weeks while making little progress, cash really isn’t missing much other than additional sleepless nights stemming from wild intraday and intraweek swings up and down.

We will start with the present day chart. Notice how far price is below the daily moving averages; think “how much white space is between the market and the moving averages?” In the present day case, the answer is “a lot of white space.” The moving averages are all sloping down, telling us the bias from a trend perspective remains down until proven otherwise.

1987 – A Lot Of White Space

Notice in the early stages of the 1987 crash/correction (see October 19), there was also a lot of white space between the market and the moving averages (similar to 2015). Typically, not always, a market that has seen such a sharp plunge away from the moving averages takes time to repair itself and form a bottom, which is exactly what happened in 1987. It took several weeks for price and the moving averages to “reduce the white space”. Once price moved back toward the moving averages, it told us the odds of a permanent bottom forming were higher. Everything we do with charts speaks to probabilities, not predictions or certainties.

The chart above tells us it may take time for the present day market to form a sustainable bottom.

1990 – It Took Time To “Close The White Space”

In the early stages of the 1990 correction below, like 2015, the market and moving averages were separated by white space. Similar to the bottoming process in 1987, it took time for stocks to close down the white space in 1990 and set the stage for a sustainable push higher.