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April 21, 2007

Bombay 30 Emulates DJIA Pre-Crash 1987
by Dan Basch

The Detonator That Is The Bombay 30

An uncanny chart correlation between the Bombay 30 Sensex and the DJIA Pre-Crash 1987 charts has become apparent. Observe first how closely the S&P 500 correlates to the Bombay 30 Index and then picture how both would likely continue their association on into the future:

Next, observe the fate of the DJIA when the Rising Wedge which formed over a period of months and its striking similarity to the way in which Bombay has evolved as denoted by the "W" formations as visual reference points. I believe this is a template linking the past of the DJIA Crash of 1987 with another in the coming period on today's Bombay 30 which is linked to the S&P 500, hence the overall U.S. and global indices. History may repeat imminently.

Record Retail Margin, Electronic Anesthesia and Mass Psychology

In addition to this highly similar chart setup, CNBC has reported that retail margin debt is at an all time high of $321 Billion which is 7% higher than at the top of the NASDAQ tech bubble in March 2000. Furthermore, the public has become anesthetized into complacency by the endless parade of Wall Street cheerleaders and daily reports of new highs such that surely proverbial trees grow to the sky and perpetual capital appreciation in global and domestic markets is a given. It seems like only yesterday there was the same certainty for price appreciation of Florida condos. These observations form a tripod of technical, fundamental and mass psychological indicators which may be more reliable than any one alone in order to make this daring call: Based on this correlation and the triumvirate of technical, fundamental and mass psychological extremes, I estimate that multiple markets worldwide are about to crash, meaning double-digit percentage declines in the coming near-term period.

As a die-hard contrarian, I live for moments like this. To watch me play along with the market and see whether I either crash and burn or make cash and learn, please visit my free public website at stockcharts.com, Black Magic Charts, and maybe throw in a vote at the bottom of the page if you like it. The information provided here and at the free website are for entertainment purposes only and are not to be considered in any way financial advice.

Best regards and good luck with your capital adventures.

Dan Basch

Copyright © 2005-2009 Dan Basch

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