Good news: S&P 500 to fall 80%!!!

Helene Meisler has some good news for stock market watchers who are concerned about the future: the market is going to fall 80% from its peak!

Oh, you think that doesn't sound like good news? Well, as Meisler states in a recent article, people have overreacted to the recent churning markets. While the volatility has spooked many, Meisler recalls similar volatility in the 2000 downturn.

I had this recollection that the moves we saw after the tech bubble burst in 2000 were just as wild as we have seen now. Yet no one was discussing this.

Wait, I remember that downturn well. And I do *not* recall similar volatility. What is she talking about?

In early April 2000, Nasdaq actually lost -- get this --27% in five trading days.

Ah, I see. Nasdaq experienced similar volatility. Yes, I do remember this. And it's exactly why "no one is discussing" it, because it's not nearly the same thing.

At the time Nasdaq was a much larger chunk of the market, over 1/3 of the total market cap. But it still didn't set the course for the entire market. The S&P 500 didn't experience volatility close to what Nasdaq did at the time. And there was no real economic crisis occuring back then other than the Nasdaq's meltdown. The rest of the economy was sound, if lurching toward a mild recession.

Now, however, it's the entire stock market that's churning the way Nasdaq vacillated at the turn of the millenium. That's why people are freaking out today, not to mention the entire financial system freezing up. Believe me, the vast majority of people watching the market today remember exactly what happened in 2000. But Meisler doesn't seem to recall what happened over the next few years.

For while she speaks of the comparison—between today's market and 2000's Nasdaq—she doesn't follow it through to its logical conclusion. She says that there may be a short-term trading play to take advantage of when the market props up over the next few months, with which I agree. But what she should be talking about is the fact that Nasdaq fell over 80% from its peak to its 2003 low.

If today's S&P 500 resembles 2000's Nasdaq, we may see the S&P 500 at 320 again.

Now, if you've read this site's thesis, you know that's even worse than the 75% decline projected by the Massive Double Top for which this blog is so eloquently named.

Therefore, far from giving market watchers a much-needed reality check that the sky isn't falling, she unwittingly has provided excellent corroborating evidence that the sky, indeed, is going to fall. At least 4/5th of the way.

It's remarkable that this projection complements the technical analysis so well. The market action is actually confirming the prediction of the chart formation. So it might be a good idea to follow up on her short-term prediction. If the total market follows the path taken by the 2000 Nasdaq in the short term, it's even more likely to follow it in the longer term. Human nature (and economic cascading) remaining the same over the last several years, I see no reason we shouldn't consider that the same result may occur.

If there's anything to be rosy about, it's the possibility for one hell of a buying opportunity. Not now, but in a year or more, when the S&P 500 sits at 400, or 350, or wherever it lands. There will be money on the floor, waiting to be scooped up, like they said about 73-74, and 1933. And yes, about 2003 as well.

Meisler writes, "Everyone says things are more sped up now for some reason. I don't know about you, but it looked pretty sped up to me in the spring of 2000."

It was, though nothing like today. And in the next few years, the pedal might really be pushed to the metal.