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History Does Matter! | Stock Market Update 12/7/13

|Includes:Apple Inc. (AAPL)

(click to enlarge)Click to enlargeThere are a couple of interesting articles on MarketWatch that you might want to check out. The first one is called the Ghost of 1929 crash reappears. This article talks about a chart that compares the last 18 months prior to the peak of the stock market in 1929, to our current situation. The charts eerily resemble each other. Apparently Tom DeMark, a legendary technical analyst, discovered this correlation and passed it to Tom McClellan of the The McClellan Market Report.

Tom McClellan also has a discussion of these charts on their home page. Apparently when you play the analog out, our market would peak on January 14, 2014 and then dramatically turn down. Now I am personally not convinced that we will go to new highs, as there is a very good chance our high was achieved on November 29, 2013.

In a second article on MarketWatch, The chart that's scaring Wall Street, Mark Hulbert, thinks it's not a replay of the late 1920's and the analysis is don't panic. Who knows? We will find out soon enough. But you know patterns do repeat themselves, and people like Tom DeMark, find them.

Yes, History Does Matter

In 1986-87 Paul Tudor Jones and his right hand man Peter Borish, were closely following charts from the 1920s and believed that the market was mirroring the 1920's. They expected the market to crash just like 1929. As it turns out, it is said that he made $200 million during the Crash of 1987 and the total funds under management in late 1986 was about $125 million. Yes, it does pay($$) to pay attention to history.

Can it peak now?

The market can peak at just about any time of the year. I did a check of the history of market tops before substantial declines, looking for times when the market peaked in November into February. Here's what I found:

  1. Week of January 14, 2000 Followed by 38.7% drop over 33 months
  2. Week of January 13, 1984 Followed by 16.2% drop in 23 weeks.
  3. Week of February 15, 1980 Followed by a 20.5% drop in 6 weeks.
  4. Week of January 12, 1973 Followed by a 45.1% drop in 23 months.
  5. Week of November 29, 1968 Followed by a 35.9% drop in 18 months.
  6. Week of February 11, 1966 Followed by a 25.2% drop in 34 weeks.
  7. Week of December 15, 1961 Followed by a 27.1% drop in 28 weeks.
  8. Week of January 8, 1960 Followed by 17.4% drop in 42 weeks.
  9. Week of November 18, 1938 Followed by 41.3% drop in 41 months.

Now I may have missed a couple of corrections, but the key point is this. The market can peak at any time and it doesn't have to be in the summer, leading to a crash in the fall. By the way, the all-time high in Japan's Nikkei 225 was the week of December 29, 1989.

In today's video we look at the market indices, key technical indicators, some key ETFs and then finally review Apple Inc.(NASDAQ:AAPL) again. AAPL weighs heavily on the NASDAQ and I think that AAPL may have just peaked. I first discussed that possibility in my November 27 post.

Until I learn how to insert video on Seeking Alpha, if that is possible, please go to my website for the video accompanying this post.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Stocks: AAPL