October 21, 2012
Weekly Market Outlook
By Keith Schneider
Did the US equities market have a Déjà vu moment this Friday much like Scarlett O'Hara did in "Gone With the Wind" when she foresaw her daughter getting thrown from her horse just like Pa? Does the current market resemble Pa, taking a mad wild ride but not capable of hanging on? After all, October 19 is the 25 year anniversary of the 1987 crash, so like clockwork the market sold off on cue, down about 2%.
For old time traders who were in the market back in the 1980's, today's action could be considered a token present. This was hardly the 22% decline we experienced back then, but we just might be setting up for a whole lot more with the big move coming shortly or what we chartists might categorize as displaced. There are clusters of storm clouds on the horizon, including key market leaders such as IBM, Google, AAPL and AMZN, all breaking down badly on the charts. Both IBM and Google reported disappointing earnings, shaving off more than 10% in share price. However, before one gets too gloomy owning AAPL since the beginning of the year, one would be up about 50% and almost 30% with AMZN. Certainly possible that these stocks might also be setting up a great buy opportunity but best played off the charts.
A major difference from 1987 is that if the excrement hits the fan, the Fed does not have much ammo left. It fired its final rounds with QE3. Back in 1987, Long Bond rates before the crash were about 8.5%, not the 3% today. Short term rates are effectively zero, so the Plunge Protection team might have to get up extra early one of these days. The combination of weakening earnings in bellwether stocks and the silver anniversary of the stock market crash is what behavioral finance is all about. Will market participants ignore today's headlines which remind us of history, or be spooked by it? This week's video will review the key stock indexes and their critical support levels that hold those clues.
And be sure to subscribe to our YouTube channel here and get all of our free videos as soon as they’re released!
Every week you'll gain actionable insight with:
