Monday, September 03, 2007 9:25:47 PM
The key differences between 2007 and 1987 are “the anticipation of the crash” which we already priced in and “the economic condition” which we are in dynamic global economy.
I commented on the subject on my previous comments; however, I will illustrate with charts on this post.
The anticipation of the crash: I have seen various types of analyses of comparing recent price action to 1929, 1987, and other major market correction. Such as the formation similarities, such as “W” and “RST” formations. I will show why we already priced in the correction.
The dynamic global economy: We are in Global economic environment than ever before as we can see that China and other Asian markets are showing bull market price actions. Comparing 2007 to 1987 or to 1929 is like comparing Apples and Oranges.
Why the 1987 34% correction? Among various reasons which we can come up with, it was the 205% rally going into the 34% correction.
As shown on the SPX monthly chart, SPX rallied 205% during Aug1982~Aug1987 before the 34% correction in Oct 19-20, 1987.
SPX consolidated during Jul1963 ~ Jul1980, then, it attempted to break out in Aug1980 which led to Aug1982 retest of the breakout from Dec1968 and Dec1976 tops.
After the retest of the breakout in Aug1982, SPX rallied 205% which led to 1987 34% correction.
1987 Climactic volume actions Note that the climactic volume actions during Oct 19-20, 1987. Prior to the climactic volume actions, there was no change in volume actions suggesting that the 34% correction was not expected by market participants.
Furthermore, I noted above the correction was triggered by one big market participant who sold based on the analog presentation by a technician comparing 1987 to 1929 overlay. There are various interpretations, but I think that it was mainly due to “overdue correction” after the significant 205% rally prior to the correction.
Even so, it seems that 1987 34% correction was in control since the correction is 50% of 101.44 8/9/82 – 337.88 8/25/1987 (H/L 236.44 points 233%).
The low 216.46 on 10/20/1987
The high 337.88 on 8/25/1987
121.42 H/L correction which is 36%
The 236.44 point rally which is 233% minus 121.42 points correction is 51% correction.
Based on this observation, even though the correction is crash in nature, the crash is in control since it stopped at 50% retracement.
Comparing the above facts of 1987 climactic volume actions, volume actions prior to the climactic volume actions, and 50% retracement to 2007 7/19-8/16 correction
SPX 1555.90 on 7/16/2007
SPX 1411.27 on 8/16/2007
144.63 point 9% correction
This is about 50% correction of Jun2006-Jul2007 rally. 23.6% correction of Oct2002-Jul2007 rally.
As noted, the key is the differences in anticipation of the correction. As shown on the comparative 2007 vs 1987 volumes chart, we can see that market participants were highly anticipating the significant correction shown on the significant increase of volumes going into 8/16/2007 climactic reversal.
Again we heard the 1987-1929 fractal analysis over one year; therefore, market participants are already pricing in the correction.
Therefore, we can conclude that the 2007 7/19 – 8/16 correction was indeed significant when we compare the 216% rally during Aug1982~Aug1987 followed by 34% 1987 correction which was 50% retracement of the rally TO 97% rally during Oct2002~Jul2007 followed by 9% correction during 7/19-8/16, 2007 which is 23% retracement of the rally.
In conclusion, 2007 correction is already completed and based on the IT breadth and the level of retracements during 7/19-8/16/2007 indicates that markets are likely poised to trade higher.
This is one of my previous comments on “2007 vs 1987”.
http://www.traders-talk.com/mb2/index.php?showtopic=75366
Aug 25 2007, 10:36 PM
2007 & 1987 COMPARISON: THE KEY IS VOLUME ACTION AND ANTICIPATION OF THE CRASH:
This is an interesting comparison since the anticipation for 1987 or 1929 crash was in progress during the recent correction.
Note the "CLIMATIC VOLUMES" 10/19 - 20, 1987 which is showing the similar climactic volume action on 8/16. However we had higher volumes going into 8/16/07 which is comparable to 10/19-20/87 volumes.
However, we had higher volumes going into 8/16/07 since many were already expecting a crash while 1987 was not.
Because of the fear, the shorts could further fuel the market.
Global Economy: Major Market Cycle Bottoms in Oct 2002.
Market has risen 420% since 1975 bottom, 200% since 1982 before it corrected 35% in 1987.
SPX has corrected 50% of 1980-2000 rally during 2000-2002 which is a significant correction.
Breaking out of SPX 1555 in our global economy is reasonable.
New Market Targets
QQQQ Target 57 +/-
Breakout from Jan 2004 to 38% retracement of Mar 2000 118.80 – Oct 2002 19.48 is targeting Qs 57 +/-.
Jul 19, 2007 top 50.66 was the Nov 2006 breakout of Apr 2006 top. Qs reversed from Nov 2006 breakout support of 44.50 +/- which is also 50% retracement of Jul 2006 – Jul 2007 rally. The reversal from 44.50 to anticipated breakout from Jul 2007 50.66 is also projecting 57 +/-.
The target 57 +/- will be completing the breakout from Jan 2004 top in Dec 2004 which was the initial breakout attempt which was succeeded by the second attempt in Nov 2005, followed by a correction in Jun-Jul 2006 which was resulted in a stronger price advancement in larger wave in Nov 2006-Jul 2007 sequential wave pattern.
The Jul 2007 50.66 was Oct 2002-Jan 2004 price extension from Aug 2004; therefore, Oct 2002-Jan 2004 price advancement = Aug 2004 – Jul 2007 price advancement.
The price advance pattern is targeting Qs 57 which is the target of the breakout from Jan 2004.
NASDAQ Target 3131:
Breakout from Jan 2004 to 50% retracement of Mar 2000 5132.52 - Oct 2002 is targeting Nasdaq 3000 +/- which is 50% RT of the correction.
The Jul 2007 top 2724 is 38% RT of the Mar 2000 – Oct 2002 1108.49 correction, and now Nasdaq is bounced off from the Mar 2007 2531.42 top breakout support.
The Jan 2005 break out from Jan 2004 top 2152.12 is failed, however, it again attempted the breakout 2219.91 in Aug 2005. However, it is again failed the second attempt; nevertheless, it formed higher/high price actions which subsequently traded to 2375.45 Apr 2006 top followed by Apr-Jul 2006 correction.
Price actions during Jan 2004 – Apr 2006 is a consolidation period of Feb 2003 – Jan 2004 price actions.
The Jan 2005 breakout attempt which was subsequently succeeded is targeting Nasdaq 3155 +/-. The Jan 2005 breakout attempt is technically consistent with “initial breakout attempt” is usually resolved in actual breakout.
Aug 2007 bottoming process with Mar 2007 low breakout support is consistent with the technical price pattern which a series of breakouts with higher/high price actions targeting 3155 +/- from Jan 2004 breakout.
SPX Target 1650
Global Economy: SPX Breakout Target 1650
SPX breakout from 1555 is targeting SPX 1650. Breaking out of SPX 1555 in our global economy is reasonable as we are coming off major IT breadth bottom with positive divergence in Aug 2007.
Major Market Cycle Bottoms in Oct 2002. Market has risen 420% since 1975 bottom, 200% since 1982 before it corrected 35% in 1987.
SPX has corrected 50% of 1980-2000 rally during 2000-2002 which is a significant correction.Breaking out of SPX 1555 in our global economy is reasonable as we are coming off major IT breadth bottom with positive divergence in Aug 2007.
I commented on the subject on my previous comments; however, I will illustrate with charts on this post.
The anticipation of the crash: I have seen various types of analyses of comparing recent price action to 1929, 1987, and other major market correction. Such as the formation similarities, such as “W” and “RST” formations. I will show why we already priced in the correction.
The dynamic global economy: We are in Global economic environment than ever before as we can see that China and other Asian markets are showing bull market price actions. Comparing 2007 to 1987 or to 1929 is like comparing Apples and Oranges.
Why the 1987 34% correction? Among various reasons which we can come up with, it was the 205% rally going into the 34% correction.
As shown on the SPX monthly chart, SPX rallied 205% during Aug1982~Aug1987 before the 34% correction in Oct 19-20, 1987.
SPX consolidated during Jul1963 ~ Jul1980, then, it attempted to break out in Aug1980 which led to Aug1982 retest of the breakout from Dec1968 and Dec1976 tops.
After the retest of the breakout in Aug1982, SPX rallied 205% which led to 1987 34% correction.
1987 Climactic volume actions Note that the climactic volume actions during Oct 19-20, 1987. Prior to the climactic volume actions, there was no change in volume actions suggesting that the 34% correction was not expected by market participants.
Furthermore, I noted above the correction was triggered by one big market participant who sold based on the analog presentation by a technician comparing 1987 to 1929 overlay. There are various interpretations, but I think that it was mainly due to “overdue correction” after the significant 205% rally prior to the correction.
Even so, it seems that 1987 34% correction was in control since the correction is 50% of 101.44 8/9/82 – 337.88 8/25/1987 (H/L 236.44 points 233%).
The low 216.46 on 10/20/1987
The high 337.88 on 8/25/1987
121.42 H/L correction which is 36%
The 236.44 point rally which is 233% minus 121.42 points correction is 51% correction.
Based on this observation, even though the correction is crash in nature, the crash is in control since it stopped at 50% retracement.
Comparing the above facts of 1987 climactic volume actions, volume actions prior to the climactic volume actions, and 50% retracement to 2007 7/19-8/16 correction
SPX 1555.90 on 7/16/2007
SPX 1411.27 on 8/16/2007
144.63 point 9% correction
This is about 50% correction of Jun2006-Jul2007 rally. 23.6% correction of Oct2002-Jul2007 rally.
As noted, the key is the differences in anticipation of the correction. As shown on the comparative 2007 vs 1987 volumes chart, we can see that market participants were highly anticipating the significant correction shown on the significant increase of volumes going into 8/16/2007 climactic reversal.
Again we heard the 1987-1929 fractal analysis over one year; therefore, market participants are already pricing in the correction.
Therefore, we can conclude that the 2007 7/19 – 8/16 correction was indeed significant when we compare the 216% rally during Aug1982~Aug1987 followed by 34% 1987 correction which was 50% retracement of the rally TO 97% rally during Oct2002~Jul2007 followed by 9% correction during 7/19-8/16, 2007 which is 23% retracement of the rally.
In conclusion, 2007 correction is already completed and based on the IT breadth and the level of retracements during 7/19-8/16/2007 indicates that markets are likely poised to trade higher.
This is one of my previous comments on “2007 vs 1987”.
http://www.traders-talk.com/mb2/index.php?showtopic=75366
Aug 25 2007, 10:36 PM
2007 & 1987 COMPARISON: THE KEY IS VOLUME ACTION AND ANTICIPATION OF THE CRASH:
This is an interesting comparison since the anticipation for 1987 or 1929 crash was in progress during the recent correction.
Note the "CLIMATIC VOLUMES" 10/19 - 20, 1987 which is showing the similar climactic volume action on 8/16. However we had higher volumes going into 8/16/07 which is comparable to 10/19-20/87 volumes.
However, we had higher volumes going into 8/16/07 since many were already expecting a crash while 1987 was not.
Because of the fear, the shorts could further fuel the market.
Global Economy: Major Market Cycle Bottoms in Oct 2002.
Market has risen 420% since 1975 bottom, 200% since 1982 before it corrected 35% in 1987.
SPX has corrected 50% of 1980-2000 rally during 2000-2002 which is a significant correction.
Breaking out of SPX 1555 in our global economy is reasonable.
New Market Targets
QQQQ Target 57 +/-
Breakout from Jan 2004 to 38% retracement of Mar 2000 118.80 – Oct 2002 19.48 is targeting Qs 57 +/-.
Jul 19, 2007 top 50.66 was the Nov 2006 breakout of Apr 2006 top. Qs reversed from Nov 2006 breakout support of 44.50 +/- which is also 50% retracement of Jul 2006 – Jul 2007 rally. The reversal from 44.50 to anticipated breakout from Jul 2007 50.66 is also projecting 57 +/-.
The target 57 +/- will be completing the breakout from Jan 2004 top in Dec 2004 which was the initial breakout attempt which was succeeded by the second attempt in Nov 2005, followed by a correction in Jun-Jul 2006 which was resulted in a stronger price advancement in larger wave in Nov 2006-Jul 2007 sequential wave pattern.
The Jul 2007 50.66 was Oct 2002-Jan 2004 price extension from Aug 2004; therefore, Oct 2002-Jan 2004 price advancement = Aug 2004 – Jul 2007 price advancement.
The price advance pattern is targeting Qs 57 which is the target of the breakout from Jan 2004.
NASDAQ Target 3131:
Breakout from Jan 2004 to 50% retracement of Mar 2000 5132.52 - Oct 2002 is targeting Nasdaq 3000 +/- which is 50% RT of the correction.
The Jul 2007 top 2724 is 38% RT of the Mar 2000 – Oct 2002 1108.49 correction, and now Nasdaq is bounced off from the Mar 2007 2531.42 top breakout support.
The Jan 2005 break out from Jan 2004 top 2152.12 is failed, however, it again attempted the breakout 2219.91 in Aug 2005. However, it is again failed the second attempt; nevertheless, it formed higher/high price actions which subsequently traded to 2375.45 Apr 2006 top followed by Apr-Jul 2006 correction.
Price actions during Jan 2004 – Apr 2006 is a consolidation period of Feb 2003 – Jan 2004 price actions.
The Jan 2005 breakout attempt which was subsequently succeeded is targeting Nasdaq 3155 +/-. The Jan 2005 breakout attempt is technically consistent with “initial breakout attempt” is usually resolved in actual breakout.
Aug 2007 bottoming process with Mar 2007 low breakout support is consistent with the technical price pattern which a series of breakouts with higher/high price actions targeting 3155 +/- from Jan 2004 breakout.
SPX Target 1650
Global Economy: SPX Breakout Target 1650
SPX breakout from 1555 is targeting SPX 1650. Breaking out of SPX 1555 in our global economy is reasonable as we are coming off major IT breadth bottom with positive divergence in Aug 2007.
Major Market Cycle Bottoms in Oct 2002. Market has risen 420% since 1975 bottom, 200% since 1982 before it corrected 35% in 1987.
SPX has corrected 50% of 1980-2000 rally during 2000-2002 which is a significant correction.Breaking out of SPX 1555 in our global economy is reasonable as we are coming off major IT breadth bottom with positive divergence in Aug 2007.
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