Is The Stock Market On The Verge Of Collapse? | ETF DAILY NEWS

Is The Stock Market On The Verge Of Collapse? | ETF DAILY NEWS

Is The Stock Market On The Verge Of Collapse?

March 31st, 2015

Are we watching a replay of the last financial crisis?  Over the past six months, the price of oil has collapsed, the U.S. dollar has soared, and a whole bunch of other patterns that we witnessed just before the stock market crash of 2008 are repeating once again.  But what we have not seen yet is the actual stock market crash.  So will there be one this year?  In this article, I am going to compare the performance of the Dow Jones Industrial Average during the first three months of 2008 to the performance of the Dow Jones Industrial Average during the first three months of 2015.  As you will see, there are some striking similarities.  And without a doubt, we are overdue for a major market downturn.  The S&P 500 has risen for six years in a row, but it has never had seven up years consecutively.  In addition, there has not even been a 10 percent stock market “correction” is almost three and a half years.  So will stocks be able to continue to defy both gravity and the forces of economic reality?  Only time will tell.

Below is a chart that shows how the Dow Jones Industrial Average performed during the first three months of 2008.  It was a time of increased volatility, but the market pretty much went nowhere.  This is typical of what we see in the months leading up to a market crash.  The markets start getting really choppy with large ups and large downs…

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This next chart shows how the Dow Jones Industrial Average has performed during the first three months of 2015.  Once again, we are witnessing a time of increased volatility, but the market is not really going anywhere.  In fact, after falling about 200 points on Tuesday (not shown on this chart) it is just barely below where it started the year…

When the market becomes quite restless but it doesn’t really move anywhere, that is a sign that we have reached a turning point.  The following is what a recent CNN article had to say about the rising volatility that we have been witnessing…

The Dow fell nearly 3.7% in January, surged 5.6% in February and is down about 2% this month. The S&P 500 and Nasdaq have gone through similar sentiment swings. The Dow ended the quarter slightly in the red while the S&P 500 and Nasdaq were up a little bit.

Charles Schwab chief investment officer Liz Ann Sonders summed up this volatility the best — with a nod to U2. “Running to Stand Still: Wild Swings Taking Market Nowhere” is the title of her most recent market commentary.

What can investors expect for the rest of 2015? Probably a lot more of the same.

Now let’s look at a chart for the entire year of 2008.  After peaking for the year in early May, the Dow started to slide. 

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Is The Stock Market On The Verge Of Collapse? | ETF DAILY NEWS

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