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Mullooly Asset Management

Fiduciary Fee-Only Financial Planner | Investment Advisor in Wall, NJ

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1987 Market Crash and Current Market

October 22, 2007 by Thomas Mullooly

Friday the market was down 370 points (2.7%). It also happened to coincide with the 20th anniversary of the 1987 market crash.

There are gigantic differences between the market in 1987 and the market in 2007. In 1987, inflation was 5%, long-term interest rates were at 10%, and the S&P 500 was more than 30% overvalued.

Today, inflation is around 2%, long-term interest rates are around 5% and the S&P 500 is not overvalued at all — in fact many will argue that it is undervalued.

From a point and figure perspective, in 1987 the market was on defense the market and had been on defense for nearly 6 months (an usually long period of time), and most sectors were out of favor, quite negative.

Also, sector breakdowns, multiple sell signals and support line breaks occurred on a near-daily basis throughout August and September 1987. Pretty depressing.

There was plenty of advance notice.

At the moment, the market is on offense. And many sectors are in a positive trend. There are still some issues in banking, finance and real estate — these sectors make up nearly 30% of the S&P 500.

It doesn’t mean things are completely rosy. There were a TON of breakdowns the past few days.

Look, the market’s been through an extremely good run for the last seven or eight weeks. Remember, we measure daily, weekly and monthly momentum. In many cases you’ll see a stock, a sector (or the entire market!) move in one direction for 6, 8, (sometimes) 10 weeks in a row.

This looks like a pause in a longer-term uptrend. But if conditions change (and we’ll know that from our indicators), you’ll be hearing fom us immediately.

Tom

Thomas Mullooly
Mullooly Asset Management LLC
Our Only Business Is Fee-Only Investment Advice
www.mullooly.net
support@mullooly.net

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Filed Under: Asset Management, Point and Figure

About Thomas Mullooly

Thomas Mullooly is owner and founder of Mullooly Asset Management, Inc. In 2002 Tom opened Mullooly Asset Management, a fee-only investment advisory firm. As an investment advisor, and not a broker, Tom works strictly for his clients. With the help of point and figure charting, Tom builds a realistic game plan for clients.

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2052 NJ-35, Suite #203
Wall Township, NJ 07719
Phone: (732) 223-9000
Fax: (732) 223-9600
Email: support@mullooly.net

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