Sunday, October 21, 2007

Weekend Equity Market Comment 10/21/2007

THE 1987 CRASH CROWD ARE BACK
IN VOGUE
Those of you who have been following the blog know that I do not embrace this so-called 1987 repeat scenario of a stock market crash.
It is not because I do not think the past repeats into the future, Lord knows I have much of my work devised on just this premise.
The problem I have is that you cannot simply follow price patterns alone all of the time.
In order to confirm those price patterns and especially one of the stock market crash variety, you have to see if other factors are similar.
The most important of these factors are Value and Smart Money Behavior.
While there are other factors you could find to use and trust me, the 1987 crowd will data mine until it says what they want it to, you have to use what is most important to the market and what effects prices and without question it is value and Smart Money Behavior.
Neither of these measures even come close to being similar in nature as to 1987. As a matter of fact, it is quite the opposite that holds more water. Smart Money is completely opposite to Fall of 1987 and Valuations are 1/2 what they were in 1987.
So while I do anticipate this correction to go further and the possibility of the decline getting pretty scary from time to time, I welcome all of the talk of 1987 all over again, it will help to erase the huge complacency we currently have in equities and turn some hardcore bulls over to bearish.
The sentiment at this point is the leading factor we need to see swing back to the bearish side before I can safely give an all clear for stocks. For now, keep your hedge in place and stay tuned, it could get very interesting. Don't forget also that early to mid November is our time frame for a low in stock prices.
TAKE A LOOK AT THE CHARTS BELOW AS THEY WILL
HELP TO CLEAR A MUDDIED MARKET





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