Citi Research Discusses a Dow Crash Scenario

[zoog]

http://buttonwood1792.blogspot.com/2...dow-crash.html

The rocket scientists who put this together at the CitiFX technicals team looked back at 1987, 1990 and 1998. In looking at '90 and '98 here's what they say:

"1990: The Djia peaks on 17th July 1990 and turns. This is the start of a correction that takes it down 21.8% over 63 trading days over shooting the 200 week moving average by 0.5%

1998: The Djia peaks on 17th July 1998 and turns. This is the start of a correction that takes it down 21.6% over 31 trading days

2007: The Djia peaks on 17th July 2007 and turns. This is the start of a correction at a time when the 200-week moving average was sitting 21.50% below the peak."

"With the 2 prior occasions averaging 21.7% down over 47 trading days the sweet spot (If this correction goes according to plan) would be to see the DJIA at just below 11,000 on or around 19 Sept 2007 and no later than 11 Oct 2007."

The report concludes: "Bottom line we hold our view that these are trying times and that the worst is not over. We also hold our view that lower yields will be seen in the months ahead on the back of credit, housing, the economy and equities. We believe that as this develops the Fed WILL show leadership, will cut rates as necessary and will ultimately stabilise the situation.

If we are wrong in this assessment then as we have said previously, without the Bernanke PUT we may have to entertain the idea of the Bernanke crash."

[zoog]

Re: Citi Research Discusses a Dow Crash Scenario

"With the 2 prior occasions averaging 21.7% down over 47 trading days the sweet spot (If this correction goes according to plan) would be to see the DJIA at just below 11,000 on or around 19 Sept 2007 and no later than 11 Oct 2007."

Bah, what do the guys at CitiFX know?



Jim Kingsland blog is no more, so original link no longer works. Here's a different link.

[JoeSixpack]

Re: Citi Research Discusses a Dow Crash Scenario

Zoog,

you cant call those charts a crash. Those were severe ABC wave corrections. Apart from that, i agree with you that comparing dates is a waste of time by CITI.

There are numerous reasons why a crash is possible, and all that subprime stuff etc. is just a small factor in that equation.

Investors dont fear fundamentals, they fear losses. IF we go down to the August lows, THAT is where you look for a REAL crash to happen, not now.

[zoog]

Re: Citi Research Discusses a Dow Crash Scenario

Zoog,

you cant call those charts a crash. Those were severe ABC wave corrections. Apart from that, i agree with you that comparing dates is a waste of time by CITI.

There are numerous reasons why a crash is possible, and all that subprime stuff etc. is just a small factor in that equation.

Investors dont fear fundamentals, they fear losses. IF we go down to the August lows, THAT is where you look for a REAL crash to happen, not now.

But, but but... crash sounds so much more dramatic!:rolleyes: That was the title of the original blog post I linked, not my choice of words. The CitiFX study was released on 8/24, when we had only gained a little from what turned out to be the bottom of that particular correction. At the time, I thought we might still drop another 5-10%, so their 90/98 connection was of interest. But the day has come and the Dow has recovered (for now), so I posted the chart as a followup.

There's a million analysts and economists and others out there making predictions all the time. Usually by the time the foretold scenario has potentially come to pass, I've long forgotten who predicted what and whether they were right or not. It's rare when they come back and say "Uh, yeah so, we missed that one. But trust us, our next prediction is gonna be spot on."