A 10% correction, sometime there will have to be. Everything goes in cycles. 87 happening again is very unlikely. The safeties to stop the market from going down like that would kick in. We had around 7% in Feb, but rebounded. As long as jobs and confidence still stays strong, it should be fine. Trust me, you'll see the perfect storm forming at least a few days ahead of an actual real correction. These are the same posters who said it is going to crash for the last year. Eventually, you will be right.. Just try to be closer to the actual date.
When I posted my original question, I wasnt trying to suggest that we're due for a 1987 crash anytime soon. I was just asking whether people consider the possibility when they formulate their trading strategies. Or do you feel it's so unlikely that you don't deal with it? imo, the markets are not overvalued enough for a repeat of 1987 now. The PE ratio of the SP500 and Naz are high but not to the level you see before a major crash, like in 2000. [In 2000, the Naz's TTM PE was over 100, it's currently 26.]
Don't be overconfident. The NYSE has circuit breakers at 10%, 20% and 30% which, when breached, would result in temporarily suspended trading or total halting of trading. The circuit breakers are set too high prevent a major one-day crash.
I have a bearish bias right now (I trade both sides), but I doubt a crash will ever come again in this environment where people have many ways to play both sides i.e. shorting ETFs, short mutual funds, commodity ETFs, ease of shorting stocks etc. When the market drops, some shorts take profits and this offers support to the markets. We could go down, but in steps not in a big crash. I comment on such issues on my blog, just follow my profile if you are interested.
i genuinely believe these stock markets are at nonsense levels. but looking at the market bounce from february i would say the price action suggests this is not indicative of a bearish market yet. in terms of a big fall i wish i would it would happen but think there are greater powers at be in terms of circuit breakers, exchange suspension, coordinated purchasing of index futures at good chart levels etc etc. there was so much bearish news when the market fell a few weeks ago and against all the odds the market rallied. im not a conspiracy theorist on this but too many commentators have said that the market does seem to trade naturally at lower levels as it used to.
OK Another trivia question: What GREAT rule came out of the '87 crash??? Also, what did interest rates have to do with '87 crash??? SteveD
hi folks, what would now be the least expensive way of protecting my long trading stocks? short stocks/etf`s: a lot of work and probably lose money buy a out of the money put as insurance: I heard it still costs about 3% per year and 85% of your capital will be covered so I would like to do something, not only talk about it. how do the profs do this? can anybody point me to a discussion/article that came to a definite conclusion? thanks guys
You guys dont understand the dynamics of a chart. You have this huge cup-like structure in 2006 and then your surprised that the market pulled back in February. The pullback was exactly half the height of the cup. This is NORMAL market dynamics. This is EXACTLY how a chart is supposed to function. The reason why the pullback was so sharp and intense was because of the size of the cup. In past years, there were two smaller sized corrections, but in 2006 it was one long protracted downward slope followed by a long upward protracted slope. At the end of the upward slope, your going to have an intense pullback that will usually be half the height of the cup. This is not a bearish sign in the least, but a hugely bullish one at that. Usually after such a pullback, then you have an advance that is the full height of the original cup. It is not time to be afraid yet. There will be a time when you should be afraid, but that time is not now. Stocks have a lot of room to run.
The only traders that should worry are the ones that have no idea what their margin to equity ratios are and have no idea what SPAN is. If you don't know your "what-ifs" your probably trading scared and will eventually blow up.
there is one way to tell when we are close to a correction , that is to look at the big stocks like ge,3m,ibm,etc..... just take a look at the feb. hi on the dow indu. and then look at the big stocks. bgp