Comparable crisis: 1998 or 2008?
In both 1998 and 2008, a financial crisis threatened the global economy. The Russian Ruble crisis hit in 1998. In the 2008, the collapse of Bear Stearns sent the market into a tailspin. In both cases, a fierce sell-off sent the S&P 500 below its 200 day moving average (the blue dashed line, which is also the 50 week MA). In both cases, months of volatility followed as bulls and bears were pulled this way and that in a headline-driven market. The Ruble crisis of 1998 was resolved with Russia devaluing its currency and defaulting on its debt. Markets shot upward. 2008 didn’t work out so well. Both situations bear some similarity to our current situation, but the charts of 2008 and 2011 are eerily comparable. Just like in 2008, a head-and-shoulders top led to a significant breakdown. Following months of intense volatility were followed by a fierce rally back up to the “neckline” of the head-and-shoulders formation, which (in both cases) coincided with the 200 day (simple) moving average. Will that resistance hold and push the markets lower like in 2008? Or will there be a political resolution that allows the markets to push higher like in 1998? To my eyes, it looks like a lot more like 2008.