Image via CNBC screenshot

Marc Faber, the author of the Gloom, Boom and Doom report, was on CNBC yesterday, predicting a 1987 style market crash during the second half of 2013. Faber has identified similarities between the powerful rally in the first half of 1987 that eventually stalled out. The markets took a dive during the second half of 1987, and essentially ended up flat for the overall year. The S&P 500 is up around 20% this year so far, and hit all-time highs this week.

We are currently in the midst of earnings season. Faber says earnings are no longer growing enough, and that the current rally is being fueled by a small number of stocks. He says the 1987 rally similarly ended in August on a lower number of stocks hitting 52-week highs. Faber said that 170 stocks hit 52-week lows on Tuesday and Wednesday of this week, while the S & P hit an all-time high. He believes this set up is ripe for a significant correction of around 20% or more during the second half of the year.

This is not the first time Faber has made the same prediction. Rather, he predicted a 1987 crash in both May of 2012, and February of this year. Faber appears to be in the business of predicting crashes. Thus, it may behoove market watchers to take this advice with a grain of salt. The market may certainly be ripe for a correction after bouncing off all-time highs, but a correction would have to break through many levels of resistance before becoming a major concern for the markets.

Disclosure: The author has no position in any of the stocks mentioned, and does not intend to initiate a position in the next 72 hours.

Joshua Reider

More Posts