Analysts Warn of Impending Stock Market Crash Similar to 1987

Nick Kangadis | October 14, 2016
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There is a new warning among financial analysts that a “bear” will be taking over for a “bull” in the near future.

HSBC Bank’s head of technical analysis, Murray Gunn, has issued a “RED ALERT” warning stock brokers and investors that the stock market is poised for a “severe fall.” Citigroup’s chief technical analyst is also noticing the troubling possible market downturn.

According to Business Insider:

In late September, Gunn said the stock market's moves looked eerily similar to those just before the 1987 stock market crash. Citi's Tom Fitzpatrick also highlighted the market's similarities to the 1987 crash just a few days ago. On September 30, Gunn said stocks were under an "orange alert," as they looked to him as if they had topped out.

And now, given the 200-point decline for the Dow on Tuesday, Gunn thinks the drop is here.

The 1987 stock market crash, also known as “Black Monday,” occurred on Oct. 19 of that year causing markets around the world to drop drastically. The U.S. alone saw stocks drop 22.6 percent, which to this day is still the largest one-day drop in history.

If you look at the S&P 500 Index for the full years, the similarities between 1987 and 2016 are eerily similar. The timeline of the ups and downs for the two years almost have the appearance of synchronized swimmers executing their routine in perfect harmony.

“With the US stock market selling off aggressively on 11 October, we now issue a RED ALERT," Gunn noted. "The fall was broad-based and the Traders Index (TRIN) showed intense selling pressure as the market moved to the lows of the day. The VIX [Volatility Index] index, a barometer of nervousness, has been making a series of higher lows since August.”

Gunn also observed that if the Dow Jones Industrial Index (DJIA) and the S&P 500 fell below certain levels, that aren’t far off, there would be a huge sell-off in the markets. The warning number for the DJIA that Gunn said was the dropping off point is 17,992, while the warning number for the S&P 500 is 2,116.

As of this writing the DJIA sits at 18,172.49. The S&P 500 currently sits at 2,135.96.

As Business Insider noted, Gunn said:

“But should those levels break and the markets close below (which now seems more likely), it would be a clear sign that the bears have taken over and are starting to feast. The possibility of a severe fall in the stock market is now very high.”

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