The Dow: An Historical Perspective

Last Sunday evening I wrote (link):

with more bad news streaming in throughout the week, I anticipate we'll close lower next Friday than we did this last Friday and expect that we may even test the 6,400 levels throughout the week.

Well, after yesterday I'd say we're pretty darned close to 6,400 - lets see what the release of our new/updated US unemployment figure brings with it tomorrow...

Looking at the first chart below (click to enlarge), it's pretty staggering that, in such a short span of time, the DOW has undergone a > 50% haircut. Where/when will all this carnage end?

With the above chart digested, let's take a wider look - at the historical perspective (next chart, click to enlarge). Pretty ominous isn't it? This historical view illustrates the serious "potential" for an even much bigger correction - back to the trend line?

I anticipate (based on oversold conditions/falling PPO and quickly approaching 1995 support levels) that we may see some further downside in the days ahead, but due to these same issues the DOW will likely find downside support soon and then it will follow up with a nice rally (>8K) - before falling to new (significantly lower) depths.

DOW: Where's the floor?

Is this 1930 all over again?

Just my 2cents - not investment advice.

Comments

[Big K:]

I don't understand your rationale for predicting a nice up rally before the crash back to the trendline, which appears to be around 1800, back to the '80s. This is predicting wiggles in a stock chart, which is nonsense. Especially, since "experts" can't even predict the trend most of the time, you proport to predict even minor wiggles. Also, the 80 year history of your lower chart is on linear scale, but your upper chart is logarithmic scale (the correct scale, especially for long periods like 80 years). I think you are trying to compare apples to oranges, or is this done to "prove" your point better? I agree things are bad, but lets not use BS to make our points.

Mar 06 08:16 AM

[formerhawk:]

Trendline for S&P is probably around 1,000. Look at the credit induced bubble that appears to occur in the last 20 years. Credit cards were introduced in late 60s. Widespread use started to occur around 1985-1995. I noticed that my use of credit for staples with payment of the monthly credit card balance gave me an additional month of cashflow vs paying cash.

Mar 06 08:32 AM

[Fred Voetsch:]

I agree. We are likely to bottom somewhere a bit higher than our previous bull market high in 1966. I have consistently called for a low of 3,000 but that is more of a safe call; 1,500-2,000 is looking more likely as it becomes clear how anti-business this adminitration is.

Mar 06 12:33 PM

[raytayzmd:]

...you want "historical perspective"?...you like charts?...read this article from 2005:

sociology.ucsc.edu/who...

...and study those charts...one shows SHARE of capital income --income from capital gains, dividends, interest, and rents -- earned by top 1% versus the bottom 80%...for the top one per cent, the number INCREASED from 40 to 60 per cent between 1990 and 2003 while it DECREASED by 10 per cent for the bottom 80%...not only were the rich getting richer, they were getting richer at an increasingly rapid rate; the "average" guys were steadily falling behind...more striking is the chart of CEO pay versus the production workers' average pay...fromm 1990-2005, CEO pay went up 300% and that is inflation adjusted...production workers pay, on the other hand, went up a whopping -- drum-roll, please -- FOUR PER CENT!...no doubt due to those damn greedy unions...although that cynical author says:

"If you wonder how such a large gap could develop, the proximate, or most immediate, factor involves the way in which CEOs now are able to rig things so that the board of directors, which they help select -- and which includes some fellow CEOs on whose boards they sit -- gives them the pay they want. The trick is in hiring outside experts, called "compensation consultants," who give the process a thin veneer of economic respectability."

...no doubt he's a card carrying Communist!!...maybe the current situation is simply a moral lesson -- tis better to give than to receive.

Mar 06 01:54 PM

[Go ...Marc ...:]

A New Indicator..... bottom will arrive when the last CHRONIC BULL Idiot Larry Kudlow finally gives up.... Then you know the bottom is in...

Mar 06 07:44 PM