Historically, market crashes don’t happen from the peak. The market makes a new high, then corrects, then goes up, and only when all buying is exhausted does the market crash.
The DOW peaked at 14,164 on October 7, 2007, and didn’t bottom until November 26, 2007, at 12,743, a 10% loss in 48 days.
On August 28, 2008 the DOW hit 11,715. On October 27, 2008 the DOW hit 8,176. That was a 30% drop in 60 days.
The “final” bottom didn’t occur until March 6, 2009 when the DOW touched 6,626.94, a drop of 53% from the peak in October, 2007.
My point is this: the market doesn’t make a new high and then crash. Corrections, or crashes, occur gradually, and then all at once. That may appear to be a contradictory statement, but it isn’t. The market peaks, then eases, and then as buyers get nervous downward pressure builds and then you have a crash.
Historically these surprise crashes tend to happen somewhere in the range of 55 days after a peak, as shown in the above examples. Could be 48 days. Could be 60, but it’s somewhere in that range.
Which brings us to March 2, 2015 when the DOW made an all-time high of 18,288.63, and we have had no highs since then. On Thursday and Friday the DOW dropped into the 17,630 range, a decrease of 4% since the peak. That could be it. More money may be printed on Monday, the markets recover, and it’s on to new highs.
But, if we don’t see a new high before Monday April 27, 2015, which is 56 days since the peak, it may be time to get nervous, because that’s when unexpected crashes happen.
This six plus year bull market is fueled entirely by government money printing. Structural unemployment remains very high (labor force participation is very low, which leads to artificially impressive unemployment numbers), consumer debt is high, and commodity prices are low, which is not a sign of an economic recovery.
Something has to give at some point, so holding cash is not a bad idea. Cash will be king after the crash.
My plan? It’s not April yet, so let the good times roll. I’m doing covered writes every week on my core holdings, to mitigate my losses, or to leave me positioned for gains. So far, it’s worked out well. We shall see.
Thanks for reading. See you next week.
Market Crash on Monday April 27, 2015?
by JDH on March 14, 2015
Historically, market crashes don’t happen from the peak. The market makes a new high, then corrects, then goes up, and only when all buying is exhausted does the market crash.
The DOW peaked at 14,164 on October 7, 2007, and didn’t bottom until November 26, 2007, at 12,743, a 10% loss in 48 days.
On August 28, 2008 the DOW hit 11,715. On October 27, 2008 the DOW hit 8,176. That was a 30% drop in 60 days.
The “final” bottom didn’t occur until March 6, 2009 when the DOW touched 6,626.94, a drop of 53% from the peak in October, 2007.
My point is this: the market doesn’t make a new high and then crash. Corrections, or crashes, occur gradually, and then all at once. That may appear to be a contradictory statement, but it isn’t. The market peaks, then eases, and then as buyers get nervous downward pressure builds and then you have a crash.
Historically these surprise crashes tend to happen somewhere in the range of 55 days after a peak, as shown in the above examples. Could be 48 days. Could be 60, but it’s somewhere in that range.
Which brings us to March 2, 2015 when the DOW made an all-time high of 18,288.63, and we have had no highs since then. On Thursday and Friday the DOW dropped into the 17,630 range, a decrease of 4% since the peak. That could be it. More money may be printed on Monday, the markets recover, and it’s on to new highs.
But, if we don’t see a new high before Monday April 27, 2015, which is 56 days since the peak, it may be time to get nervous, because that’s when unexpected crashes happen.
This six plus year bull market is fueled entirely by government money printing. Structural unemployment remains very high (labor force participation is very low, which leads to artificially impressive unemployment numbers), consumer debt is high, and commodity prices are low, which is not a sign of an economic recovery.
Something has to give at some point, so holding cash is not a bad idea. Cash will be king after the crash.
My plan? It’s not April yet, so let the good times roll. I’m doing covered writes every week on my core holdings, to mitigate my losses, or to leave me positioned for gains. So far, it’s worked out well. We shall see.
Thanks for reading. See you next week.