Two Great Bounces: 1929 vs. Today

The following charts provide a simple comparison between the big stock bounce that occurred in the wake of the Dow crash of 1929 and the bounce we are seeing now in the S&P 500 index.

The method of alignment was simple: Take the first definitive up trading day off the bottom of the preceding bear market low and set that as the start of the series. Then simply re-base both series to a value of 100 so that they can be compared side-by-side.

The lower bar chart plots the cumulative percentage change since the start of each bounce.

The S&P 500 is up over 47% in a little over 160 trading days; a historically aggressive run with an obvious note of mania to it. This is wholly comparable to, even far stronger than, the price movement seen in the 1930s-era DOW rally.

At this point for the 30s-era Dow, the bull run was over as the bear trend resumed in earnest. As of Friday, though, the Bull is seriously on the move. How long will this boom last?

Only time will tell. But for now, let’s continue to keep a watchful eye. (Click charts to enlarge.)

Comments

[tunaman4u2:]

Did they have a FED willing to QE the dollar to oblivion, prevent all failures, give rebates, insure all losses?

Nov 06 01:20 PM

[thiazole:]

You guys can post this 100 times (and this probably is the 100th time this comparison has been turned into an "article"), but that still won't make the comparison legitimate. Why don't you correct for inflation/deflation when you post the Great Depression market compared to today? Oh yeah, 40% deflation takes a little bit of air out of your chart - let's just pretend it didn't happen...

Nov 06 01:35 PM

[Graham and ...:]

It takes a foreign-base brokerage firm, like the one you cited, to tell the truth about the U.S. markets. As did not.

("I'm not foreign-born but my parents are.)


On Nov 06 01:21 PM 10000ozCOCAINE wrote:

> Why Warren Buffett pays $34 billion for BNI instead max. $20 billion
> when market DJIA was at 6500?
> Why BRK depends on Goldman Sachs bankers?
> Why Buffett is buying stuff at the peak of the market instead of
> waiting to buy cheaper in a very short time ?
> Does he think DJIA at 10000 is "cheap" ?
> He buys BNI at the top to calm the matket panic and "make you buy
> too".
> Why BRK is not selling all their stuff, when W. Buffett knows very
> clear that DJIA will be 5000 soon and will bottom only at 2000 that
> will hit him too?
> Find out in WARREN BUFFET? link
> alturl.com/dzgp

Nov 06 01:45 PM

[enigmaman:]

no matter how low or how high, how hot or how cold, how wet or how dry, how expensive or how cheap, no matter what the extremes may be sooner of later no matter what anybody may believe reversion to the mean will correct whatever imbalance there may be, it always has and always will, and it usually catches most with their pants down

Nov 06 03:35 PM

[Roger Knights:]

We're at the bungee apogee.

Nov 06 04:15 PM

[bartpr:]

the 29 32 market failed because hoover would not support keeping the banks from failing. he also pumped up interest rates because of the outflow of gold from the us. he also felt that there was a need to support high wages in industry but let prices of goods fall. dont forget the smoot hartley tariff that froze world trade. is this happening now?
we have other problems that have yet to unfold. the massive injection of dollars into the system is one major .

Nov 06 06:10 PM

[untrusting ...:]

Very true and mean reversion will happen. Since the Fed appears to be willing to provide unlimited liquidity to artifically inflate asset prices, and since the PPT seems to be willing to continually intervene in the US equity markets to ensure that no major corrections happen, our best guess is that it will take the bond vigalantes to force higher interest rates on US treasuries or refusal to buy before any meaningful correction in the market will happen. Otherwise, it is pretty apparent that the Fed/Treasury will not let it happen regardless of substantial overvaluations in the equities market. Alternatively if the oil speculators manage to drive oil to $125-$150/ barrel, then that also may cause sufficient damage to override the Fed's artifical interference in the US equities market.

The PPT seems to be able to override all other negative factors such as: rising unemployment, increasing foreclosures, large CRE bad debts, decreasing federal and state taxes, rising healthcare costs, and dozens of other negative factors. Thus it seems it will take some drastic event such as an oil spike or treasury auction failure to generate panic selling that will overwhelm the PPT.


On Nov 06 03:35 PM enigmaman wrote:

> no matter how low or how high, how hot or how cold, how wet or how
> dry, how expensive or how cheap, no matter what the extremes may
> be sooner of later no matter what anybody may believe reversion to
> the mean will correct whatever imbalance there may be, it always
> has and always will, and it usually catches most with their pants
> down

Nov 06 08:35 PM

[Analyste de...:]

Should we care more about 1929 or 1907?

I find Chris Ciovacco's analysis more informative, if you must stare at a chart:
www.marketoracle.co.uk...

Nov 06 09:27 PM

[chris coonan:]

it is 1929 again, and Happy Days Are Here Again will not be played until 1938....

Nov 07 05:32 AM

[MarvinMBA:]

Job creation should be where our printed paper should be going...lets build the green intrastructure and not let GE go out of the solar panel business...MarvinMBA

Nov 07 02:25 PM

[TeresaE:]

The biggest losses to the market occurred in '32 to '34, not '29/'30. Another ignored fact: tons of government "help" along with huge "taxes on the rich" led to a depression lasting until after WWII ended in the 40s.

So, we ain't seen nothing yet.

As for government "help" the treasurer stated in '38 that we spent more, did more, than any other government EVER and yet unemployment, wealth and housing was tanking.

We never learn from history as "our" guys are always smarter than "their" guys.

But, my favorite comparison is of newspaper headlines. We have gone done the same exact '30s path: "Depression Over," "Worst Behind Us" and "Prosperity Returns."

Sound familiar?

Nov 07 08:51 PM