leo strauss: 2006 vs. 1987 I'm not really going to subscribe...

leo strauss: 2006 vs. 1987 I'm not really going to subscribe this "W" theory and here's why

Here is a current chart on the DJIA



And here is a similar time period up to the crash in 1987



While the W formation is loosely applicable, there are a couple of glaring differences which technically make a crash unlikely.

1. Time - the 1987 "crash momentum" developed very quickly. To me this element is very important because the the perception of the investment community can change over a longer period of time. With 1987, once the market started dropping during late august, the whole "gloom" idea only had to infest itself for 5-6 weeks. This time, the DJIA has has had almost 5 months to "consolidate" which it has done - in 1987, there was no consolidation - it simply went down, tried to regain its bull momentum, went down, tried again and then failed dismally.

2. Unsustainable Price gains - in 1987, the DJIA up to its initial point of decline in May had gone up 600 points or 27%. You dont need to be looking at a chart to know that the current DJIA has simply not experienced those gains over that short space a time.

It seems to me that people are trying to will the markets to crash, hoping to find whatever comparison they can to indicate that a crash is upon us. I definitely subscribe to the fact that fundamentals in the US are pretty awful right now, but that isnt really translating into the share market.

Imo, the markets in the US have consolidated in that range between 10650 & 11450 (at the moment) and its going to take a pretty severe shift in momentum and sentiment to turn this around. Not saying it wont happen, but I'm short that shorters who have been calling a crash since 10650 would be burning a little right now.

Anyways, just my 2 cents worth. When I read that article the other day, I thought I'd check it out and that scenario just doesnt look like it CAN pan out.

Marchello