This is the second article in a series of modern day Manias. Part 1 can be found here. The Year 2000.
2007 was a market top that will be remembered for a long time. It started with a market mania in the housing sector, created a mania in the banking sector and caused a series of events that fell like dominoes as they relentlessly tumbled one after the other.
Let's bring up the chart showing how the topping structure looked. Compared to the 2000 top, this market was remarkably different. The tops were still close to each other. The Russell 2000 ($RUT) made its top in July but the other three, the S&P 500 ($SPX), the Nasdaq Composite ($COMPQ) and the Dow Jones Industrial Average ($INDU) all topped within a few weeks of each other. The Dow and the $SPX as well as the Wilshire 5000 ($WLSH) all had the high close on October 9th and an intraday high on the 11th that was higher. The Nasdaq and the Nasdaq 100 ($NDX) both topped on October 31. However, in 2000, the Nasdaq pair both fell away quickly. In this 2007 market top, all the markets rolled over together with relative unison which made the top much easier to spot. It was probably still difficult at the time. That rollover move is tight compared to the 2000 top where they had a lot of sideways movement in some indexes while the others were making church spires. All the markets dropped at least 50% so that is huge. That means an investor needs 100% to get back to where they started. Notice the amazing similarity of all the price patterns.
Continue reading "A Series On Market Manias Through The Charts From 2000 To 2015. Part 2 - 2007 " »