The stock market might be heading for a major sell-off, according to a renowned investor. Robert Prechter, the founder of Elliot Wave International, has cautioned that the current market situation is reminiscent of the years leading up to the 1929 crash.
What Happened: Prechter, who is famous for predicting the 1987 stock market crash, has raised concerns about the current market’s stability. He believes that investors have become too complacent, reported Business Insider.
Prechter, in an interview with Fox Business Network, warned that the market conditions are similar to those before the 1929 crash. He also highlighted the extreme bullishness among investors and the various warning signs in the market.
“The market has been complacent for years. It’s held up a long time, but this is the thinnest market I’ve ever seen on the upside,” Prechter said, adding that he won’t be surprised if there is a correction of 30% in the market.
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Prechter is not predicting a crash as severe as the one in 1987, but he does anticipate a significant downturn. He advised traders to consider safer bets and expressed his lack of interest in long stocks at this time.
Prechter’s warning comes amid other concerning signs in the market. The market is currently experiencing a concerning concentration of power among the top 10 stocks on the MSCI USA Index, reminiscent of the dot-com bubble of the early 2000s.
Why It Matters: Another market strategist, Jon Wolfenbarger, also warned of a potential stock market crash and a year-long recession, citing various economic indicators that suggest an impending downturn.
The warnings from Prechter and Wolfenbarger come at a time when the stock market is experiencing significant volatility. The market’s current structure, with a concerning concentration of power among the top 10 stocks, is reminiscent of the dot-com bubble of the early 2000s, as highlighted by JPMorgan Chase & Co.'s quantitative strategists. This, combined with the warnings of a potential stock market crash, raises serious concerns about the market’s stability.
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