Stock Market Crash Update - 2004

I have read in the newspapers this weekend (16th May 2004) of there being several similarities between the 1987 stock market crash and the current Dow Jones. With this in mind, I have taken another look at the Dow chart and have also compared it to the 1987 chart, and also the 1929 chart. At first glance, there are some similarities between the 3 charts. The 1987 and 1929 charts I found in the book, The Spiral Calendar, are virtually identical before their crashes. They also crashed around the same time of year, i.e. October. Overlaying the 2004 chart to date, the advance/decline patterns are very similar. Does this mean that we are about to see a huge decline in stock prices?

Taking a look at the 2004 Dow chart, I think not. The decline from the year 2000 high of 11853 is very volatile, choppy, and impossible really to label as an Impulsive Wave. In other words, it appears to be a correction in the main trend (up) not part of a new bear market.

I have the correction labelled with a WXY shape. Each leg has 3 obvious sub-waves (abc). Up from the 2002 low has topped at trendline resitance and could be the top of another corrective phase - the second Wave X - to be followed by a large decline in a Wave Z. This would lead to lows under Y's 7180. More likely, I feel, because the advance off 7180 is smooth and trend-like, is that 7180 was an end to the large correction (WXY). And that the market has topped at the high of Wave 3. The recent decline from 10650 on February 04, is correcting this advance, falling to a maximum low around the high of Wave 1 at 9040. This would also be a 50% retracement from the bottom of Wave 2 to the high of Wave 3. From there, I would expect a recovery back through the year 2000 highs to 12,000.

Perhaps, then, this would be the end of the Grand Supercycle and we really would see a stock market crash! (90%)


Update December 14th 2004

Here is an updated weekly chart of the Dow nearest futures contracts. Wave 4 held the maximum predicted low of 9040 and broke to the upside heading for highs around 12,000.

 
 
Disclaimer: There is risk of loss trading futures.
The information presented in this site is for informational purposes only. Investment in futures involves a high degree of risk, your investment may fall as well as rise, you may lose all your original investment and you may also have to pay more on the original amount invested. Consult your broker or advisor prior to making any investment decisions. Past or simulated performance is not a guide to future performance. Copyright 1999-2016 Futures-Investor.co.uk. All rights reserved.
Futures-Investor, Old Mill House, Rockfield, Monmouth, NP25 5QE. Tel: +44 (0) 1600 715 039 Email philriou@futures-investor.co.uk