Nomura Updates Its "Nightmare" Chart


One week ago, ahead of an especially violent selloff in the stock market – and yesterday’s historic rally – Nomura’s head of cross-asset strategy Charlie McElligott showed what has been dubbed a “nightmare” (or “forced goalseeking” according to some) chart, according to which plotting the current selloff since the Sept 20 high, and screening back to 1929, yields the highest correlation to the 2007/2008 selloff period:

The current cumulative SPX return from Sep 20th ‘til now looks shockingly like the SPX 1Y return profile from Oct 9th 2007 through Oct 3rd 2008—yikes.

Fast forward to today when Wall Street is gripped in debate whether yesterday’s 5% spike in the S&P was merely a particularly violent short squeeze-cum-bear market rally, or it signified the end of the current correction/bear market (depending on how one counts the last S&P prints on Monday’s rout).

And while McElligott can’t answer that particular question, which can only find a response in hindsight, the Nomura strategist has shared an updated chart of the current selloff to the Oct. 2007/2008 bear market analog so readers can get a sense of what may happen next if this is indeed just the start of the first bear market in the past 10 years. It is shown below.




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