The recent market action has been very choppy to say the least. It is very reminiscent of the end of the bull market in 2007. Looking at a comparison of the S&P 500 over the two periods provides a very scary comparison indeed. You can see that the charts are almost identical. From this point in 2007, the S&P 500 declined about 16% over a period of 4-5 weeks.
I’m not saying that this is what’s going to happen, but it is interesting to think about the possibilities. In 2007 we had poor data in the form of a housing market slump and the beginnings of the sub prime crisis. In 2012 we have the Euro crisis. Scary times indeed and given that the current bull market is nearly 3.5 years old and looking a bit long in the tooth, it might be time to start thinking about raising cash or at least having some portfolio protection in the form of long puts.
SPX 2007
SPX 2012
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