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Foreseeing a crash based on statistics?

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Foreseeing a crash based on statistics?

Analyst Lee Smith sees worrying signs.

Market analyst Lee Smith is getting a bit worried.

The stock market is currently above its 6-month and 24-month moving average price. Smith observes that "Two times in the last 15 years when the stock market price has gone below its 6-month and 24-month moving average price, there has been a stock market crash to its 1-year low. The 6-month moving average price is the short term trend and the 24-month moving average price is the long term trend."

 

"In 2000 and 2007, when this Index made its two previous highs, both times within 2 years it was followed by a downside of over 40%."

 

The S&P 500 Index is at its all-time high and would drop by more than 50% if it was to fall to its last low of under 900 points as in 2009. In 2000 and 2007, when this Index made its two previous highs, both times within 2 years it was followed by a downside of over 40%.

Matt Timmons, who has a 401k with Fidelity Investments, told Lee Smith in an interview: "In 2008 when the market collapsed, my retirement plan declined by 45% and I should have switched to money market funds back then."

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