MarketWatch’s Markman: Stocks Look 'Eerily' Like Before 1987 Crash

Sunday, 11 Nov 2012 04:24 PM

By Dan Weil

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Both technical and fundamental factors look bad for stocks now, says MarketWatch columnist Jon Markman.

The Standard & Poor’s 500 Index slid 2.4 percent this past week.

On the technical side, “credible people, by which I mean non-lawmakers, are noticing that the chart of the past year looks eerily similar to the one prior to the 1987 crash [see http://tinyw.in/MJVH],” he writes.

Editor's Note: 'It’s Curtains for the US' — Hear Unapologetic Warning from Prophetic Economist.

Then and now, the market rose to a high in April, then fell in June, before re-ascending to a final top in August-September.

Markman doesn’t see a 1987-style crash coming now, because large-cap stocks were “incredibly” overpriced then, which they aren’t this time around. In addition, the Federal Reserve under Chairman Alan Greenspan raised interest rates shortly before the crash, which obviously won’t happen again soon.

Stocks began sliding this September soon after the Fed announced its latest quantitative easing (QE3), Markman notes.

“That was expected to be a positive event, but it ushered in a rolling thunder of value-eroding news.”

In particular, he cites economic weakness in Europe and China and the fiscal cliff here at home. So while Markman doesn’t expect a crash, “I reserve the right to be surprised,” he says.

Others, too, are bearish. "Clearly taxes are going up, and that is something the market doesn't like,” Stephen Massocca, managing director at Wedbush Morgan, tells Reuters. Investors also are concerned about economic and earnings weakness, he says.

Editor's Note: 'It’s Curtains for the US' — Hear Unapologetic Warning from Prophetic Economist.

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