Markets Peak and Collapse


by Gary Christianson, Miles Franklin:

Markets rise into unsustainable tops and correct. It is comforting to believe every correction is a pause in a larger rally. However, stocks, bonds and commodities rise and sometime collapse. The “everything” bubble shows signs of a progressing crash.

Past examples of peaks and crashes from the last 40 years suggest caution with current markets.

The dollar peaked, followed by bonds and the Transports, DOW, S&P and NASDAQ.

The Dollar peaked, followed by the Transports, DOW, NASDAQ, and T-Bonds.

Possible current crash: Consider these peaks (daily closes):

Bonds peaked, followed by the dollar, Bitcoin, Transports, DOW and NASDAQ 100.

Market tops persist for months as they rotate from sector to sector.
The current sequence of tops resembles the 1987 crash. Bonds and the dollar peaked first, followed by stocks.
Once a market peaks it takes time for “buy the dip” to transform into “sell the rallies,” which becomes “get me out at any price.”
A typical investor buys late in the cycle, holds too long, and sells near the bottom after the crash. Human nature encourages us to follow the herd which is often dangerous.
Past performance is no guarantee, but we can learn from it.
The purchasing power of fiat currencies declines with time. Hence stock and commodity prices rise. Wait long enough and prices will exceed previous highs. Most people find this difficult.

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