Markets Could Crash ‘Like in ’87,’ Faber Says

The preliminary report of the University of Michigan-Thomson Reuters index was 77.8 in May, up from 76.4 in April. Plus, the current economic conditions index jumped to 87.3, another best since January 2008, and up from 82.9 in April.

The Dow plunged 23% on Oct. 19, 1987, in the biggest crash since 1914. On the same day, S&P 500 dropped 20%. That year, the Dow ended up 23% higher, and the S&P improved 2%.

"If the market makes a new high, it will be a new high with very few stocks pushing up and the majority of stocks having already rolled over," Faber said. "The earnings outlook is not particularly good because most economies in the world are slowing down."

Faber said that the S&P rallied in 2009, made an orthodox top on May 2, 2011, at 1,370, and then a new high of 1,419 on April 2. "The new high was not confirmed by the majority shares … and every day there are some shares that are breaking down …," said Faber, whose prediction of a February selloff in global equities never occurred.

"I think we may have seen the high of the year unless you get a huge—a huge—QE3, and that may not be forthcoming," said the investment expert, noting slower growth at many U.S. firms, especially those tied to sales and earnings in Europe.