I have been struck with the similarities between today and the period in 1987 leading up to the crash. The oversized rally into the Friday high evoked even more correlations. We had a Cup with Handle formation in the SPX going into October, 1987. As of Friday, I believe that the current SPX also has a Cup with Handle formation.

There are some structural differences, since the 1987 crash was an A-B-C correction, while the current wave is a 1-2-3-4-5 impulsive decline. That is why I put the red arrow at the wave (2) high of C, a five-wave impulse.

As I said, the outsized wave [2] puts this in the category of the 1987 crash in more ways than just the Cup with Handle. In 1987, the dollar was kept artificially high, especially against the Yen. Today it is the Euro and Yen against the dollar, with the same global impact when the adjustment comes.

There is virtually no defense against a global currency rout. In fact, when you take the politics out of the equation, a major Euro and Yen devaluation will do a lot to make the situation more tenable in Europe and Japan.

I will discuss this topic a bit more in the days to come. In the meantime, it appears that the US stock futures are declining. Japan may have had its last hurrah today (it jumped 100 points at the open) and appears to be making a key reversal.

Regards,

Tony

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