Will History Repeat?
Posted July 31st, 2007 by manystrom
in
Remember February 27th? The market had a big drop on a nearly 10% correction of the Shanghai index. It looked like the bull market had finally run its course. It looked like the end was nigh.
In hindsight, it was just a little blip, a little speed bump on the road to 14,000 for the Dow. Key support was at 12,000, which held. China's market soon recovered and went on to set new highs. All was well.
If the last drop was called the "Shanghai Surprise" this one should be called the "Subprime Surprise." Except no one should have been surprised. Shocked is a better word - shocked that these losses were allowed to be disclosed! Once again we find ourselves in the same position as the early spring. Things look dire - it looks like this might be the end of the bull market. Wednesday started off with a triple-digit rally that melted away into a triple-digit loss.
Will history repeat? Time will tell. Stay tuned...
Bookmark/Search this post with:
- New charts, news and financial links -- both the bull and the not bull -- updated each day on the homepage.
- For more articles like this, please see the Archive
- If you would like to be notified of updates, and new articles, subscribe to my low volume announcement list
Market Updates:
Triple Tops... Were Made To Be Broken?
I think the technicals this time are much different. You've got a ten week long trading range, a breakout-to-breakdown, three lower lows, narrowing moving averages, and a failure to regain the support levels from the previous range. That chart there makes it look like a head-and-shoulders. If things stay around their current levels on the S&P, then you'll see a violation of the lower trendline for the past twelve months' rally. That, and while I'm reaching for the tin foil hat, as much as I hate to say to it, if you look at the Elliott Waves with about September 2004 as the bottom, it looks like wave 5 just peaked.
The only bright spot in my mind is that the press overall has lacked enough contrarian signs along the lines of the "Everyone ought to be rich" and "Going way out on margin: why it's always a safe bet" variety that we'd expect with the 14,000, and the sudden reversal of the attitudes in the financial "news" like Yahoo! posting "Five Reasons to Sell, Sell, Sell" give a contrarian reason to stay long. But at the same time the news coming out of the hedge funds and subprime lenders is worse every day--Bear Stearns is down by three in the past couple weeks.
Great site redesign too!
Hi Bear Cave
Nice to hear from you, and thanks for taking the time to register and post a comment.
Things indeed are a little different than last time technically. It is difficult to say when the final end will come, only that it will. It seems that the market has become completely disconnected from the US economy. Foreclosures abound as the market hits new highs. On the other hand, the 30 stocks that make up the Dow are well positioned internationally. It is a global economy, and for the time being growth in the rest of the world seems quite strong.
The similarity that I see between this time and last time (Feb) is that once again, everyone thinks this is the end. There is panic. At the very least I expect a bounce - but it is getting into that time of year again: fall. In 1987, stocks peaked in late August - in '29 it was early September. Maybe this year the top came early?
The economy definitely seems to be slowing, oil is nearly at $80 and Bernanke seems intent on not cutting rates....Not a good combination.