Eerie Line Chart Similarities between 1929 and 2009
by Chart School - January 29th, 2010 12:05 am
Eerie Line Chart Similarities between 1929 and 2009
Courtesy of Corey Rosenbloom at Afraid to Trade
Here’s another perspective on the comparison charts of the Dow Jones between the 1929 crash and recovery and the 2009 crash and recovery.
Let’s take a quick view of the line charts of the daily Dow Jones in 1929 structure and how it compares with today’s weekly Dow Jones structure.
First, the Daily Dow Jones: 1929 Crash and Recovery
I drew the numbers not so much as an Elliott Wave notation, but so that comparing key swing highs and lows would be easier.
The peak to trough crash lasted 72 days as the Dow Jones fell 47% (peaking in September 1929 at 386 and falling to 195 in November 1929). It unfolded roughly in a 5-wave progression.
The rally began off the November lows and lasted 155 days, peaking up 47% at 295 during April, 1930.
This shows an important principle in investing and trading, namely that if your account (or an index) falls 50%, then it would take a full 100% rally off the lows to recapture the prior highs, and not a 50% rally off the lows as seen above.
The rally phase took twice as long as the ‘crash’ phase and also unfolded in a 5-wave affair (with smaller waves).
I found it interesting that the daily chart showed an almost identical head and shoulders reversal pattern that failed - which is similar to the June/July failed head and shoulders pattern in 2009.
Because the 2008-2009 crash and recovery took longer, I am showing the weekly line chart of the Dow Jones.
Finally, the Current Weekly Dow Jones 2008-2009 Crash and Recovery:
Again, we see a similar 5-wave slow-crash down to the final March 2009 lows.
Price peaked in October 2008 at 14,198 and then fell 52% to the March 2009 lows of 6,469 - 72 weeks (510 days). The decline also fell in a similar 5-wave decline (with the 3rd wave ‘fractalizing’ into its own mini-five wave decline).
From the March 2009 lows, price has - so far - rallied 65% to the January high of 10,723 over the last 320 trading days… or almost all of 2009.
Again, despite the 65% rally, price is still 5,000 points lower than its 2007 peak.
The current rally also unfolded in a mini-five wave affair on a steeper angle than that of 1929, but the ’swings’ are similar - even down to the failed head and shoulders (between green…
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Iceland downgraded to junk as it heeds 70% of the electorate on Icesave debt
by ilene - January 6th, 2010 4:55 pm
Iceland downgraded to junk as it heeds 70% of the electorate on Icesave debt
Courtesy of Edward Harrison at Credit Writedowns
The latest piece of big news in the sovereign debt crisis comes, remarkably, from Iceland. The country collapsed into depression after its experiment as an open economy with a large banking
After a debt-fuelled boom and a huge influx of hot money due to high interest rates, its currency and banks collapsed under a fleeing of foreign money and huge losses. The government nationalized the bank’s debt only to find the banks were too big to bail. The Icelanders rioted on the streets, a sovereign crisis ensued, and the government was toppled.
Iceland was rescued and it seemed all was well. They was even talk of fast-tracking Iceland into the EU. Then, suddenly, the population balked at the prospect of bailing out the banks. Now, the sovereign debt crisis is on again. At issue is Icesave, an Icelandic bank that operated in the UK and the Netherlands whose bust caused great hardship amongst British and Dutch savers who were attracted by high
See the video below on why Fitch is now downgrading the country’s debt status to junk despite the lack of immediate liquidity concerns.
I think this is big news and have a number of sources on this story below. Watch the Dutch and British stories for signs of European tensions as this is where the affected Icesave savers reside. The FT headline says it all. Ambrose Evans-Pritchard’s commentary is the most comprehensive and balanced in my view. The Norwegian headline, on the other hand, is “Iceland not on the verge of collapse” in huge typeface. The fault lines are definitely opening in Europe. I will discuss this later on the latest story on Greece and the likelihood of EU help.
Sources
Reykjavik warned of political isolation – FT
Iceland can refuse debt servitude – FT
Iceland faces crisis after Icesave rejection – Reuters
Iceland leader vetoes bank repayments bill – BBC News
Iceland’s president blocks £2.3bn Icesave deal to compensate the UK – Telegraph
Angry Iceland defies the world – Ambrose Evans-Pritchard, Telegraph
Icelanders to vote on whether to repay UK over bank bailout – Guardian
Poll: Should Iceland be forced to pay? – Guardian
President IJsland verwerpt Icesave-akkoord – NRC Handelsblad
IJsland isoleert zich met veto Icesave-akkoord – NRC Handelsblad
IJsland houdt referendum over omstreden Icesave-akkoord – Financieele Dagblad
Island ikke på randen av kollaps – E24
Islands hårde krise – Berlingske Tidene
Islands parlament hasteindkaldes – Berlingske Tidene
Les Islandais consultés sur le remboursement de la…
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Asia tells the west to get off its high horse
by ilene - January 4th, 2010 4:23 am
Asia tells the west to get off its high horse
Courtesy of Edward Harrison of Credit Writedowns
You kind of saw this coming didn’t you. Asians remember the Depression that began there a decade ago all too vividly. Many still see the West to blame because of the draconian economic policy solutions meted out by the IMF, including now-US Treasury Secretary Tim Geithner amongst others.
Incongruously, the very same Tim Geithner of “deeply unpopular, deeply hard to understand” economic policy fame is part of an American economic policy making group now perpetrating perhaps the largest financial and economic bailout in history. I certainly doubt this policy will be effective over the long-term. Even so, this hypocrisy has been noted in Asia. The political fallout is just now coming due.
Ronnie Chan, chairman of Hang Lung Properties in Hong Kong writes in the FT:
While the world debates the future of its financial system, global rebalancing or even power shifts along five dimensions are quietly taking place. Their implications are profound and may well lead to a more stable world.
The first is a rebalancing of moral authority. The system that the west touted as superior has failed. Why should developing countries blindly follow its model now? Remember the moral high ground that western leaders took during the Asian financial crisis? Hong Kong was bashed when its government intervened in August 1998 in the stock market to fend off the western investment
banks and hedge funds bent on destroying the city’s currency.Yet only a month later, the US government intervened in the market to bail out Long-Term Capital
Management , a move that proved to be the harbinger of the western bail-outs of financial institutions in the past year. Hong Kong’s government was not allowed to save its citizens, yet by a double-standard the US could save its companies.The waning of the west’s moral authority is also due to the many conflicts of interest inherent in investment banking as it is currently structured. The west turned a blind eye to them. What can developing economies do? Nothing, for the wealthy countries dictated the rules of the game, which became a licence to misbehave.
The moral superiority of the west was also expressed through its ideology. China was barred from being a member of the Group of Eight leading nations, presumably owing to its lack of western-style democracy. Now some in America are advocating a G2 with only the US and China.…
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Key Theme In Interview With ShadowStats’ John Williams (You Guessed It) - Hyperinflation And The Death Of The US Economy
by ilene - December 30th, 2009 1:38 pm
Key Theme In Interview With ShadowStats’ John Williams - (You Guessed It) Hyperinflation And The Death Of The US Economy
Courtesy of Tyler Durden
If you thought John Williams, who a month ago prophesied that the US could be facing hyperinflation as soon as 2010, has changed his tune, think again. In an interview conducted by Phil Maymin of the Fairfiled Weekly, the man who has made a business out of debunking the government’s data fabrication machine, dishes out some very hard to swallow truths about the US economy and where the fiat world is headed. As always, Williams’ perspectives are debate-worthy by all, whether inflationist or deflationist: in a field of media sycophants, JW is not afraid to speak what we all know, yet rarely wish to acknowledge.
*****
Maymin: So we are technically bankrupt?
Williams: Yes, and when countries are in that state, what they usually do is rev up the printing presses and print the money they need to meet their obligations. And that creates inflation, hyperinflation, and makes the currency worthless.
Obama says America will go bankrupt if Congress doesn’t pass the health care bill.
Well, it’s going to go bankrupt if they do pass the health care bill, too, but at least he’s thinking about it. He talks about it publicly, which is one thing prior administrations refused to do. Give him credit for that. But what he’s setting up with this health care system will just accelerate the process.
Where are we right now?
In terms of the GDP, we are about halfway to depression level. If you look at retail sales, industrial production, we are already well into depressionary [territory]. If you look at things such as the housing industry, the new orders for durable goods we are in Great Depression territory. If we have hyperinflation, which I see coming not too far down the road, that would be so disruptive to our system that it would result in the cessation of many levels of normal economic commerce, and that would throw us into a great depression, and one worse than was seen in the 1930s.
What kind of hyperinflation are we talking about?
I am talking something like you saw with the Weimar Republic of the 1930s. There the currency became worthless enough that people used it actually as toilet paper or wallpaper. You could go to a fine restaurant and have an expensive dinner and order an expensive bottle of wine. The next morning…
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David Rosenberg’s 2010 Outlook “The Recession Is Really A Depression”
by Zero Hedge - December 10th, 2009 10:31 am
David Rosenberg’s 2010 Outlook "The Recession Is Really A Depression"
Courtesy of Tyler Durden
With December almost done, and all the banks having already issued their rosy outlooks for 2010 (don’t ask us how the trading desks are axed, but you be sure a certain sense of "contrarianism" permeates Goldman’s traders), the objective third party strategists begin chiming in. We present Rosie’s 2010 outlook from Today’s Breakfast with Dave piece, courtesy of Gluskin Sheff.
The credit collapse and the accompanying deflation and overcapacity are going to drive the economy and financial markets in 2010. We have said repeatedly that this recession is really a depression because the recessions of the post-WWII experience were merely small backward steps in an inventory cycle but in the context of expanding credit. Whereas now, we are in a prolonged period of credit contraction, especially as it relates to households and small businesses (as we highlighted in our small business sentiment write-up yesterday).
In addition, we have characterized the rally in the economy and global equity markets appropriately as a bear market rally from the March lows, influenced by the heavy hand of government intervention and stimulus. But in classic Bob Farrell form, 2010 may well be seen as the year in which we witness the inevitable drawn out decline that is typical of secular bear markets. There may be some risk in industrial commodities if global growth underperforms, but the soft commodities, such as agriculture, may outperform in the same way that consumer staple equities should outperform cyclicals in an environment where economic growth disappoints the consensus view. Gold is operating on its own particular set of global supply and demand curves and should be an outperformer as well, especially when the next down-leg in the U.S. dollar occurs. We are not alone in espousing this view — have a look at Why Consumes Are Likely to Keep on Saving on page C1 of today’s WSJ.
The defining characteristic of this asset deflation and credit contraction has been the implosion of the largest balance sheet in the world — the U.S. household sector. Even with the bear market rally in equities and the tenuous recovery in housing in 2009, the reality is that household net worth has contracted nearly 20% over the past year-and-a-half, or an epic $12 trillion of lost net worth, a degree of trauma we have never seen before.
As households begin to assess the shock and what…
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Can Dopamine Make Your Future Look Brighter?
by ilene - November 29th, 2009 12:21 am
Our choices are dramatically influenced by the chemicals circulating through our bodies - so how much free choice do we really have? Is free will just an illusion? - Ilene
Can Dopamine Make Your Future Look Brighter?
By John Cloud, courtesy of TIME
Humans have expended a great deal of intellectual energy over the past few thousand years trying to understand the morality (or amorality) of seeking pleasure. Most of philosophy begins with the question of what defines the (or a) good life. But what if the answer to what makes us happy comes down to how much of a particular chemical is circulating in our brain at any particular moment?
(As with risk taking, romantic love, religousness…. - Ilene)
The neurotransmitter dopamine isn’t quite that powerful, but evidence has been mounting for the past 40 years that its activity is key to helping the brain recognize experiences that cause pleasure. The more dopamine a certain event (having sex or eating ice cream, say) triggers, the more strongly that event gets hard-wired in the brain, and the more intensely your brain drives you to revisit it.
That knowledge also helps the brain figure out how much pleasure it can expect from future experiences and, therefore, influences virtually any decision you make about what you might like or not like: whether you should buy the red shirt or black one, whether you’ll enjoy watching Top Chef over Mad Men, whether you should leave your job or whether you should move in with your boyfriend.
Now a new paper in the journal Current Biology shows for the first time that by tinkering with levels of dopamine in the brain, researchers were be able to influence people’s future decisions in a reliable, predictable way. Led by Tali Sharot and Tamara Shiner of the the Wellcome Trust Center for Neuroimaging at University College London, scientists presented 61 healthy volunteers with 80 different vacation locations, such as Brazil, Thailand and Greece, and asked the volunteers to rate how happy they thought they would be visiting each place. Later, 29 of the participants were given 100 mg of levodopa (or L-DOPA), a drug that increases dopamine in the brain; the other 32 were unwittingly given a sugar pill. Forty minutes later, each participant was given a questionnaire about their emotional state, then a list containing half of the previously rated destinations. They were asked to imagine themselves vacationing in each of the far-flung locations.
The next…
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Paranormal Activity to Another Black Monday?
by ilene - October 31st, 2009 1:09 am
Paranormal Activity to Another Black Monday?
Courtesy of Leo Kolivakis, publisher of Pension Pulse, h/t Zero Hedge
Simon Maierhofer of ETFguide.com writes Whats Next - Minor Correction or Major Collapse?:
Over the past few months, every attempt by the bears to depress prices has been met with renewed buying pressure, resulting in even higher prices. What goes up, however, has to come down and some subtle signs are indicating that this decline might be more than a simple correction, much more.It was after midnight on April 15th, 1912 when the unsinkable did the unthinkable. Built and labeled as unsinkable, the Titanic was the most advanced and largest passenger steamship of its time.
Even though the Titanic’s crew was aware of the fact that the waters were iceberg-infested, the ship was heading full-steam for a destination it would never reach.
Being aware of danger is one thing; acting prudently for protection is another.
Today, investors find themselves in an environment that is infested with symbolic icebergs. For savvy investors willing to pay attention and heed warnings, this doesn’t necessarily translate into a financial shipwreck, while others might soon be reminded of the Titanic when they look at their account balance.
Iceberg cluster #1: Lack of leadership
Throughout the financial meltdown financials, real estate, and homebuilders fell harder and faster than broad market indexes a la S&P 500 and Dow Jones. Beginning with the miraculous March revival (more about that in a moment), the broad market rose while financials, real estate, and homebuilders soared.
Those three sectors led the decline and led the subsequent (mock) recovery. Since it is reasonable to assume that those sectors will continue to lead the market throughout this economic cycle, it behooves investors to watch such leading sectors closely.
The S&P 500 recorded a closing high on October 19th at 1,097. The Financial Select Sector SPDRs reached their closing high a few days earlier on October 15th. Since their respective closing highs, the S&P 500 has dropped 2.82%, while XLF has already shed 5.64%.
A more pronounced performance slump is visible in the home builders sector. The SPDR S&P Homebuilders ETF peaked on September 16th and has fallen 9.97% since. Keep in mind that XHB’s lackluster performance comes on the heels of the biggest monthly increase in total home sales in ten years.
Even though the inventory of existing homes fell 7.5% month-over month in September (to 3.6 million units), the shadow inventory of 3.5 million foreclosed homes is…
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AMERICAN PIE
by ilene - October 21st, 2009 10:14 pm
Jim Quinn presents a most dire prediction of our national journey into a hellish nightmare, the worst yet to come.
Was it all foretold in this incredible song? - Ilene
Don McLean - American Pie - Live On Imus In The Morning
AMERICAN PIE
Courtesy of Jim Quinn at The Burning Platform
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I can still remember
How that music used to make me smile
And I knew if I had my chance
That I could make those people dance
And maybe they’d be happy for a while
But February made me shiver
With every paper I’d deliver
Bad news on the doorstep
I couldn’t take one more step
I can’t remember if I cried
When I read about his widowed bride
But something touched me deep inside
The day the music died
Drove my Chevy to the levee but the levee was dry
And them good old boys were drinking whiskey and rye
Singing this’ll be the day that I die
This’ll be the day that I die
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IS THIS THE DEATH OF CAPITALISM?
by ilene - October 21st, 2009 3:42 am
IS THIS THE DEATH OF CAPITALISM?
Courtesy of The Pragmatic Capitalist
“A great industrial nation is controlled by its system of credit. Our system of credit is privately concentrated. The growth of the Nation, therefore, and all our activities are in the hands of a few men… We have come to be one of the worst ruled, one of the most completely controlled and dominated, governments in the civilized world—no longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and the duress of small groups of dominant men.” – Woodrow Wilson
MarketWatch ran a very provocative article by Paul Farrell titled “The Death Of Soul Capitalism: 20 Reasons America Has Lost Its Soul And Collapse Is Inevitable”. Of course, such a title attracts attention. As of the time of my writing the article had well over 1,000 comments. Screaming “fire” in a crowded theater attracts attention after all. Mr. Farrell’s story, however, isn’t just your latest case of screaming “fire” in a crowded theater. This country and capitalism as we know it are at an incredibly important juncture in history.
While I agree with parts of the article, the overriding outlook is incorrect in my opinion. Despite the current sad state of affairs I have not lost faith in the system that has created more wealth and more prosperity in 200 short years than any other system in the history of man. We are on a slippery slope, but not a hopeless slope. Despite this, I believe there is a fundamental misunderstanding between the capitalist system upon which this country was founded and the banking controlled capitalist system that has run amok these last two decades. Fixing our problems involves fixing the banking controlled crony capitalism that currently has a stranglehold on the country.
The article begins by referring to the lopsided state of affairs on Main Street and Wall Street. As regular readers knowI am furious at the way the banks have taken advantage of the taxpayer. I am furious about the Fed’s plan to try to print our way to prosperity. I am furious about the government’s continued irresponsible fiscal policy. I am furious that the government and the Federal Reserve are so willing to destroy the dollar’s we work so hard for due to their irresponsible policies and spending. But the recent weaknesses exposed in the U.S. economy…
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Biden: “This is a Depression”, Not a Recession
by ilene - October 20th, 2009 7:07 pm
Biden: "This is a Depression", Not a Recession
Courtesy of George Washington
Joe Biden said yesterday:
My grandpop used to say … "When the guy in Minooka’s out of work, it’s an economic slowdown. When your brother- in-law’s out of work, it’s a recession. When you’re out of work, it’s a depression.”
[Asked how he views it, Biden responded:] Well, it’s a depression. It’s a depression for millions of Americans, through no fault of their own.
Before you decide whether Joe is just shooting his mouth off again, read this, this and this.
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
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