When this indicator hits this sort of level, the market struggles to rise anymore and normally register some kind of top. Check it out in this PDF.
The technicals in the stock market are off the charts right now. This is like the peak in ’29 or 2000, actually significantly worse. Whats happened this year has blown me away. I wonder if we’ll get a 29/87 style crash or even something worse.
Market optimism hits Black Monday-level peak, a ‘potential significant danger’
- The spread between bulls and bears hasn’t been this high since early 1987, shortly before the Black Monday market crash, according to the latest Investors Intelligence reading.
- Bulls in this week’s survey totaled 63.5 percent against just 14.4 percent for bears. A spread above 30 points signals “elevated risk” while 40 points calls for “defensive measures.”
The roaring stock market has professional investors riding high, so much so that it’s rekindling memories of the 1987 crash.
In terms of sentiment, the difference between bulls and bears hasn’t been this high in 30 years, according to the latest Investors Intelligence reading. Back then, stocks were bubbling their way toward the worst single-day sell-off in history when the Dow collapsed 22 percent on Oct. 19, 1987.
Bulls in this week’s II survey totaled 63.5 percent against just 14.4 percent for bears. That’s a spread of 49.1 points, well above the level the editors believe represents potential danger in the market.
A spread above 30 points signals “elevated risk” while 40 points calls for “defensive measures,” according to II’s formula.
“Sentiment readings have roughly followed their 1987 pattern,” II Editor John Gray wrote. “Then the bulls peaked (near 65%) with initial market highs early that year and they returned to above 60% levels months later after more index records. In 1987 stocks crashed a few months after that. A repeat of that scenario suggests potential significant danger for over the remainder of 2017!”
It’s gonna be bad. Who has enough money in savings that they could live off of if they get laid off? It’ll all come down.
The U.S. Isn’t Prepared for the Next Recession
Maybe it will start with a failed initial public offering, followed by the revelation of widespread fraud in Silicon Valley. Perhaps energy prices will spike, sapping the finances of anyone who drives a car to work. Maybe a foreign crisis will cause a credit crunch, or President Trump will spark a global trade war. A recession might seem like a distant concern, with the latest data showing that the current, extraordinarily economic long expansion just keeps humming along. But one will hit eventually, for some reason or another—that’s how economies work. And when it does, the country won’t be ready.
The average middle-class household has largely recovered from the Great Recession, which began nearly 10 years ago, in December 2007. The growing economy has started to boost earnings across the income spectrum, and higher housing prices have done the same for net worth. The amount of debt that households owe is falling, too. Yet millions of people remain in perilous financial shape, with little to buffer them in the event of a layoff. Roughly half of respondents to a Federal Reserve survey conducted in 2015 said that they could not come up with $400 in an emergency, with a third saying they could not cover three months of expenses, even if they sold assets, dipped into retirement accounts, and asked friends and family for help. Outsize wealth and income continue to accumulate at the very top of the scale, and the finances of millions of American families remain fragile. Americans are no worse off than they were when the last recession hit, in other words, but a decade of growth has not made them more secure, either.
Market forces: Handy guide to how the bubble will burst (1999)
Hubble, bubble, asset-price trouble