Reference: Double or triple terminal pattern in the S&P500 prior to the crash.
You may also see a H&S formation.
However, the mood at the time was neutral on some surveys, yet in others things were extreme.
With VIX under 11, we have an extreme today in 2014.
With Margin Debt at the highest ever, we have some extreme optimism.
With a few trillion or more of market capitalization in internet-vapor stocks, more than 20% of outstanding market cap overall, we are getting extreme. (Rough estimates).
With the lowest interest rates and the lowest bond spreads versus treasuries, we are in extreme territory.
What will make people sell today in 2014?
Why did people sell in 1987 in the fall? What were the reasons back then? At the time, it wasn't exactly obvious. Sure long term interest rates had risen from 6% to 10% on the 30-year US Gov't Long Bond. That was one consideration. Sure, inflation had crept up to 7% from 4%, creating a low real-cost of borrowing (much like today), and there were international tensions and a weak US Dollar. We also had Capital Gains Tax Rates going to 28% from 20% in 1987 which encouraged some to take profits while the profits were on the table.
There is no way to truly forecast the future accurately, but all we can do is respect each others opinions and watch how the market acts to news and see if the path of least resistance is UP or DOWN.
The future will always unfold a little differently each time and if we collectively keep a close eye on what is happening, we can get in and out of the market in a timely fashion and take advantage of both overvalued and undervalued markets. There is always a time to sell and a time to buy. It can't be a one-way market forever.
Trade well - think for yourself.
Tim West
4:43PM EST, Friday, June 13, 2014
You may also see a H&S formation.
However, the mood at the time was neutral on some surveys, yet in others things were extreme.
With VIX under 11, we have an extreme today in 2014.
With Margin Debt at the highest ever, we have some extreme optimism.
With a few trillion or more of market capitalization in internet-vapor stocks, more than 20% of outstanding market cap overall, we are getting extreme. (Rough estimates).
With the lowest interest rates and the lowest bond spreads versus treasuries, we are in extreme territory.
What will make people sell today in 2014?
Why did people sell in 1987 in the fall? What were the reasons back then? At the time, it wasn't exactly obvious. Sure long term interest rates had risen from 6% to 10% on the 30-year US Gov't Long Bond. That was one consideration. Sure, inflation had crept up to 7% from 4%, creating a low real-cost of borrowing (much like today), and there were international tensions and a weak US Dollar. We also had Capital Gains Tax Rates going to 28% from 20% in 1987 which encouraged some to take profits while the profits were on the table.
There is no way to truly forecast the future accurately, but all we can do is respect each others opinions and watch how the market acts to news and see if the path of least resistance is UP or DOWN.
The future will always unfold a little differently each time and if we collectively keep a close eye on what is happening, we can get in and out of the market in a timely fashion and take advantage of both overvalued and undervalued markets. There is always a time to sell and a time to buy. It can't be a one-way market forever.
Trade well - think for yourself.
Tim West
4:43PM EST, Friday, June 13, 2014
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