Is the 1987 crash just history, or can it happen again? Or more pointedly is it going to happen in 1997? A lot of things are different today compared to 1987. Interest rates are low and they are not rising as they were in 1987 and the dollar is not getting pounded by other currencies as it was in 1987. But current valuation levels are just as extreme as they were in 1987 and we have had a tremendous bull market that is almost 3 years old. And if you compare today's chart to that of 1987, they are eerily similar.

This is a chart of the Dow Jones Industrials for 1987 and 1997. The charts start in December 1984 and December 1994, respectively. Since the price value of the Dow has risen dramatically since 1984, we normalized the prices so that they show the percentage change from the start of the chart.

We went back a little further for this next chart and added data from the 1929 Crash

Next, we decided to zero in on the market tops. In 1987, the market peaked on August 25th. In 1929, the market top was on September 3rd. So far in 1997, the market top was August 6th. We built a chart that normalized the data for the market tops, and then lined up the peaks so they hit at the same data point. This way we could look at the respective market action just prior to and just after the market top.