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S&P chart spooking the Street

  • Making the rounds across trading desks is this chart showing the near-exact correlation of the S&P 500's current run with that of the index in the years just up to the1929 crash.
  • Sadly for the bears, the chart probably says more about the human brain's tendency to see patterns where none exist, or as BTIG's Dan Greenhaus puts it, "Chart overlaying is lazy." The chart's popularity tells Greenhaus everyone wants to believe everyone else is "all bulled up."
  • S&P 500 ETFs: SPY, SH, SSO, SDS, IVV, SPXU, UPRO, VOO, RSP, RWL, EPS, BXUB, TRND, SFLA, BXUC, BXDB
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Comments (6)
  • Mattster
    , contributor
    Comments (162) | Send Message
     
    Go look at the culture of the 1920s and you would find an unwavering faith in markets, deep seeded trust in bankers, and pop songs proclaiming "nothing but blue skies for now on". So it crashed. Completely different mindset today. We have done the opposite: built a wall of worry so big no one can see over it.
    22 Nov 2013, 12:08 PM Reply Like
  • ucantfixstupid
    , contributor
    Comments (47) | Send Message
     
    Good point Mattster completely different attitude, also different approach to economic stimulus and financial rescues, and yet we can still manage a big dive, just let the tea party in charge for a couple of weeks
    22 Nov 2013, 12:48 PM Reply Like
  • Tom Armistead
    , contributor
    Comments (5357) | Send Message
     
    Compare the right and left scales. They aren't proportional. If they were, it would ruin the fit.
    22 Nov 2013, 01:53 PM Reply Like
  • kimboslice
    , contributor
    Comments (1501) | Send Message
     
    Oh brother.

     

    Does no one remember that margin requirements were different in 1929?

     

    A stock bubble inflated by credit is dangerous. The margin requirements were changed after 1929. Try buying your stocks with 100% margin today.

     

    Why did real estate become such a bubble until 2007? Because you could buy the asset with credit, not real savings.
    22 Nov 2013, 04:18 PM Reply Like
  • Tactical111
    , contributor
    Comments (190) | Send Message
     
    Now it's all about sentiment and QE with a taste of zero prime for flavor. If any two of these three legs shake the whole row of dominoes go clattering down. Wait till early 2014 when chatter of tapering rears it's ugly head. Time for the Big Boys to take their profits I'm thinking.
    22 Nov 2013, 09:42 PM Reply Like
  • Qniform
    , contributor
    Comments (2608) | Send Message
     
    "the chart probably says more about the human brain's tendency to see patterns where none exist"

     

    A few dozen SA authors depend on this fact.
    22 Nov 2013, 10:25 PM Reply Like
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