This correction, in itself, should not be a concern. What might be a reason for caution are the events leading up to this point and simultaneous market actions; ie, commodities, bonds and the currency. I would love to get the current read from Ned Davis, but publicly he is silent. To his clients, who pay a large fee for advice I suspect he is concerned about the current period and similarities to 1987.
In the 81-84 time frame, the market bull roared, especially in tech stocks. 85-86 there was a collapse in the market much like 2000-2002. Late 86 the market began to take off again, especially low priced technology stocks...and they climbed through the summer of 87...there was no fear. Late August to September there was a bit of selling but no fear.
The early part of October brought a rather stable market, then it hit. A hundred point drop on Friday.....the weekend...then Monday morning....news of a jet being shot down and another general negative news event (can't remember) and then it hit. The Crash. Watching FNN (yes I remember that ...Ed Hart, John Bollinger John Murphy) was un real.....real panic. Most stocks dropped 50-70% within hours..many stocks had no market..no bottom...and it just snowballed. It was devastating to most.
Leading up to the October 87 crash...gold was rising...the Fed had just changed from easing to restrictive, the dollar was dropping, the bond market tanked a year earlier and the funds from bonds went into stocks in late 86-early 87.
I am not predicting another crash. Then again it wouldn't surprise me at all. |
