The two significant pullbacks in the past three months have made the specter of a stock market crash in 2015 much more plausible.
In the past week, the Standard & Poor's 500 Index has rebounded from a 5% drop this month. Back in October, the S&P 500 plunged 7.5% before recovering.
Is the market trying to tell us something?
We found seven charts that explain why the markets have repeatedly stumbled this year – and why a bigger stock market crash in 2015 looms on the horizon.
Taken together, these charts paint an unsettling picture of a market on a shaky foundation. With the current bull market now 5.8 years old – the average is 3.8 years – investors need to be careful.
This doesn't mean investors should sell every stock they own in a blind panic. But it does mean investors must be selective and remember to use trailing stops.
Now, let's take a look at those charts. Forewarned is forearmed, as they say…
7 Charts That Warn of Stock Market Crash 2015
The stock market can only ignore these numbers for so long:
Stock Market Crash Chart No. 1: Oil and the S&P 500
Over the past few weeks, nothing has gripped the financial world like the plunge in oil prices. Oil prices are down 28% just in the past month and more than 46% from their highs for the year.
Despite the recent pullback, stocks haven't followed oil. But as you can see in the chart, oil prices and stock prices usually don't diverge by much. And when they do, it's not for long.
For the moment, traders seem to be hoping lower oil prices will stimulate economic growth. But one of the less discussed reasons for oil's decline is falling global demand from a slowing global economy.
Looking at this chart, either oil prices need to rise or stock prices need to fall. Which do you think is more likely?
Editor's Note: A CIA economist has just leaked the Fed's knowledge of a 25-year depression and what could lead to a $100 trillion American meltdown. To see the evidence, click here.
Stock Market Crash Chart No. 2: The Shiller P/E Ratio
The cyclically adjusted price/earnings (CAPE) ratio, created by Robert Shiller, smoothes out the price/earnings (P/E) ratio by averaging it over 10 years.
Now at 26.76, the Shiller P/E is way over its long-term average of 16.5. Note that the Shiller P/E has only been higher twice. It hit 30 at the end of the 1920s, just before the stock market crash of 1929. And it soared to 44 at the end of the 1990s, just before the dot-com stock market crash.
About the Author
David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.