|
They say history doesn't repeat it merely rhymes. If
that's the case, we may be setting up for a 2007 market crash. Take a look at
this 1987 stock market crash picture:
Chart 1 - 1987 stock market crash picture
Since the early 80s the stock and bond markets had been motoring along
nicely. Bonds made a high in early 1986 and had been building a top formation
into 1987 (not shown). Then in early 1987 Bonds moved lower out of their top
formation. The weakness continued until early May when all told the Bond
market received a 15% haircut.
The stock market however wasn't phased. It was quite content to plough
ahead even in the face of a deteriorating bond market. In fact, once bonds
made a short term bottom in May the stock market celebrated and rallied to
fresh highs.
The summer of 1986 saw bonds and stocks rally together -- until July. Bonds
began declining again (I'm sure the expectation was a double bottom as the
stock market continued to surge).
Then came Fall (excuse the pun). Bonds broke below their May lows in
September and the market finally sat up and noticed. From then on out it was
Katy Bar the Door - the stock market proceeded to tumble into what culminated
as the largest 1 day decline in history - Black Monday 19th of October 1987.
Fast forward to today:
Chart 2 - 2007 market crash?
Bonds made a high at 115
in late 2006 and have been trending lower ever since. The
stock market likewise has been unfazed (except for a brief hiccup in March)
and has been boldly moving higher.
We are now entering an especially interesting phase in relation to
1987. Bonds began their latest leg down in earnest in March at which time the
stock market surged higher -- eerily similar to 1987. Now, Bonds have been
staging a moderate bounce since June and if the 1987 picture is to unfold
again, the minor rebound would be close to over.
If bonds turn lower (as they very well could because of the weak
Dollar) I would take that as the first sign of caution. If bonds break below
their June lows I would take it as a MASSIVE warning.
Not co-incidentally, gold stock prices are beginning to come
alive!
More commentary and stock picks follow for
subscribers...
Greg Silberman CA(SA), CFA
greg@goldandoilstocks.com
February 15, 2007
I am an investor
and newsletter writer specializing in Junior Mining and Energy Stocks. Please
visit my website for more free articles and analysis
Click here: http://blog.goldandoilstocks.com
This article is
intended solely for information purposes. The opinions are those of the author only. Please conduct further research and
consult your financial advisor before making any investment/trading decision.
No responsibility can be accepted for losses that may result as a consequence
of trading on the basis of this analysis.
_______________________________________________________________________
This
article is intended solely for information purposes. The opinions are those
of the author only. Please conduct
further research and consult your financial advisor before making any
investment/trading decision. No responsibility can be accepted for losses
that may result as a consequence of trading on the basis of this analysis.
Information contained
herein is obtained from sources believed to be reliable, but its accuracy
cannot be guaranteed. It is not intended to constitute individual investment
advice and is not designed to meet your personal financial situation. The
opinions expressed herein are those of the author
and are subject to change without notice. The information herein may become
outdated and there is no obligation to update any such information. The author, 24hGold, entities in which they have an
interest, family and associates may from time to time have positions in the
securities or commodities discussed. No part of this publication can be
reproduced without the written consent of the author.
|
