Stock Market showings signs of 1929 Crash Parallel.

There are eerie parallels between the stock market’s recent behavior and how it behaved right before the 1929 crash. That at least is the conclusion reached by a frightening chart that has been making the rounds on Wall Street. The chart superimposes the market’s recent performance on top of a plot of its gyrations in 1928 and 1929. The picture isn’t pretty. And it’s not as easy as you might think to wriggle out from underneath the bearish significance of this chart. I should know, because I quoted a number of this chart’s skeptics in a column I wrote in early December. Yet the market over the last two months has continued to more or less closely follow the 1928-29 pattern outlined in that two-months-ago chart. If this correlation continues, the market faces a particularly rough period later this month and in early March. (See chart, courtesy of Tom McClellan of the McClellan Market Report; he in turn gives credit to Tom DeMark, a noted technical analyst who is the founder and CEO of DeMark Analytics.)
One of the biggest objections I heard two months ago was that the chart is a shameless exercise in after-the-fact retrofitting of the recent data to some past price pattern. But that objection has lost much of its force. The chart was first publicized in late November of last year, and the correlation since then certainly appears to be just as close as it was before. To be sure, as McClellan acknowledged: “Every pattern analog I have ever studied breaks correlation eventually, and often at the point when I am most counting on it to continue working. So there is no guarantee that the market has to continue following through with every step of the 1929 pattern. But between now and May 2014, there is plenty of reason for caution.” Tom Demark added in interview that he first drew parallels with the 1928-1929 period well before last November. “Originally, I drew it for entertainment purposes only,” he said—but no longer: “Now it’s evolved into something more serious.” More


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2 Responses to Stock Market showings signs of 1929 Crash Parallel.

  1. Pingback: RESTAURANT THAT SERVED HUMAN HEAD IS SHUT DOWN/MArk of the beast technology goes mainstream/5th banker commits suicide in 2 weeks/Russia To Sign Arms Deal With Egypt and more signs of JESUS’ soon return | ARKOFGOD

  2. Y. V. says:

    This is silly. It’s easy to take a time series and find a close enough match to it if you look back far enough. For instance, you can take a time series of the water depth of the Nile from the past year and given enough data, find a match that looks exactly like the trend we’re seeing now but with a flood “projected” into the future. Crashes and economic calamities are shocking because they are unexpected and in a certain sense, unpredictable. This is not to say that a crash is not possible, but that the data are not equipped to provide you with that information.

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