Predicting the actual week, let alone the day, of a market crash is all but impossible. However, there are certain key developments that HAVE to happen in order for the market to crash. Think of them as BIG warnings, or the FOUR Horsemen that precede a stock market apocalypse. What are they? When most heavily weighted companies began to break down badly. Technically, the S&P 500 is made up of 500 companies. However, each of those 500 stocks don’t receive the same weight from the index. Rather, certain stocks receive a disproportionate weighting giving them a much larger impact on the market’s price action. Because of this, in order to get a crash, you need the heaviest weighted stocks to break down badly. Put another way, even if most of the 500 companies in the overall market are in a downtrend, if the heaviest weighted stocks DON’T break down, it’s pretty much impossible for the overall market to crash. I’ll outline precisely how this played out before the 1987 Crash (arguably the worst single-day collapse in stock market history) in tomorrow’s article. Until then… Best Regards, Graham Summers Editor, Money & Crisis |
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