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Strategies & Market Trends : The Stock Market Bubble -- Ignore unavailable to you. Want to Upgrade?

To: Caroline who wrote (948)	8/4/1998 5:05:00 AM
From: Moominoid	Read Replies (1) \| Respond to of 3339

You seem to be saying that the market is in a pre-crash correction right now. What would distinguish the market's behavior as a "crash" rather than a "correction"? I have absolutely no idea whether there will or will not be a "crash". I'd bet though that the Dow won't be above 9000 or so at the end of the year. If there could be a "crash" it is worth comparing the current index history to those historic crashes. After the peak there is a decline then a small rally not reaching as high, then the crash. I was saying that the correction so far seemed pretty strong and fast compared to those previous pre crash correction (1929, 1987 and the mini one in 1997). So maybe there wouldn't actually be a crash per se - ie investors are a bit ahead of the game now compared to those historic events. But again (unlike the Elliott Wave theorists) I can see that there are lots of different possible paths and it's difficult to see out beyond 1 to 2 days at best. So anything could happen. The 1-2 days tells you if a crash could happen not if it will. David

To: Caroline who wrote (948)	8/4/1998 8:24:00 AM
From: Arik T.G.	Read Replies (1) \| Respond to of 3339

Caroline, Correction vs. crash Assuming we have seen The Top, and there's a lot of supporting evidence for it, the crash scenario has much more hold in reality then a benign correction. 1. MFs cash holdings low. Continuous redemptions will cause positive feedback loop. 2. Any setback in corporate profitability will change valuations dramatically (think of DELL not able to show substantial growth) 3. A large part of the consumer confidence is based on their growing assets, chiefly equity portfolio. A big correction will undermine the consumer confidence and generate slowdown, and there's that loop again. But the main argument for a crash is that the market is too high for correction. A correction means that after a while stock prices will continue higher. In the current state of mind of investors, if the bull market continues, it has to keep pace with previous years' gains. A market making 5-10% a year is not what investors are looking for. In the last 3 years growth companies valuation outpaced their growth. For their price to go back to 'normal' their annual return has to fall behind their growth. Is that possible? The market could have corrected from 8200 last year. It tried to, but couldn't resist the inflows of funds. The higher we get, a correction becomes less likely, and a crash more likely. ATG