The shaded tan area shows another example of Great Depression crash dynamics - the ~20% initial 1930 decline, followed by a rally. This time the rally lasted 4 weeks and retraced about 55%. This is actually the analogy that seems more probable given that it resulted from a secondary peak in the market.
The initial decline off the 1930 high was 12 trading days which also measures properly with the 12 trading day decline from July 21 until yesterday. Actually, I'm looking at a futures chart where the peak was in the overnight on July 22 and the decline from July 22 was 12 trading days.
While the periphery breaks down rather slowly at first, the capital cities of the hegemon should collapse suddenly and violently.
Hong Kong Exchanges & Clearing Ltd., the world’s biggest bourse operator by market value, said it suspended trading for companies including HSBC Holdings Plc (HSBA) after its website was hacked.
Europe’s largest bank by market capitalization, Cathay Pacific Airways Ltd. (293) and five other stocks were halted after a “malicious attack” on the exchange’s website for corporate filings, Chief Executive Officer Charles Li said yesterday. The website was partially disabled as companies including Hong Kong Exchanges reported earnings.
This is another way of looking at the Great Depression pattern in the stock market with respect to the current pattern.
The September 3, 1929 high was 386.10, the October 4, 1929 low was 320.45, and the October 11, 1929 rebound high was 358.77. All Dow Jones numbers.
The October 11, 2007 high was 1576.09, the March 17, 2008 low was 1256.98, and the May 19, 2008 rebound high was 1440.24. All S&P 500 numbers.
These ratios are very similar. Of course, the difference is the 2007 and 2008 action was much more spread out over time.
After both of these highs, lows, and rebounds came the first crashes. A similar loss also occurred during the crashes.
The post 1929 crash rebound high was 297.25 on April 16, 1930.
The post 2008 crash rebound high was 1370.58 on May 2, 2011.
Now let's say all of the "can kicking" since 2008 just served to create an "air pocket" under the market as mentioned a few times.
We can calculate where the S&P 500 post crash rally would have topped out had it followed the 1929 to 1930 trajectory. That would be 1576.09 * (297.25/386.10) = 1213.39. This was near the 2010 high of 1219.80.
From the April 16, 1930 high of 297.25 the Dow fell for 12 trading days to 249.82. This low was reached on May 5, 1930 (80 years and one day before the flash crash low).
Out of curiousity, let's ratio this first post 1929 crash decline with the Dow 1929 high; in other words 249.82/386.10, which is 0.6470. This gives us an idea of how big the potential QE2 "air pocket" is.
If the "air pocket" came out all at once, that would imply an S&P 500 price of 1576.09 times 0.6470, or 1020.
Thus, if the crash were to continue now, I would expect the S&P 500 could hit 1020 if it follows the 1929 and 1930 trajectory and all the QE2 manipulations were for nought.
Going further, if QE2 was harmful, the market might crash even further than that.
I hope that was all clear or sensible.
Having said all that, my bias is that the QE2 "air pocket" (if such a thing does exist) will deflate in stages.
While the periphery breaks down rather slowly at first, the capital cities of the hegemon should collapse suddenly and violently.
Kinda like a gradient factor in observations of ratio's.
Forecast the next stage of business cycle (particularly interested in trough)
That would be are air pocket we discussed as predicated business cyle we are in.
old53 conveyed Oscillation, which I see as ucl and lcl of sandard deviations.
I am not focused for growth "posture" as this brush fires burns we are seeing as we speak as conveyed until spring 2013
as formentioned in forum. I still posit fatal deciet as Hayek counter to the Monetarists. I feel when Nixon slammed the window
as a axis point launch. Hit ratio channel
I'll mention one thing right off the bat. During crisis periods, the stock market doesn't lead the business cycle because investors get giddy and focus on the day to day news while ignoring sound principles. Meaning specifically that the onset of the 1929 and 2007 recessions as determined by NBER were coincident with the high in the stock market.
The same is occurring now I believe. I believe these 3 incidents are the only ones in the past 100 years.
That I believe is part of the reason the "air pockets" or crashes are so large during crisis periods, but now we have the additional factor of a possible QE2 "air pocket".
While the periphery breaks down rather slowly at first, the capital cities of the hegemon should collapse suddenly and violently.
Then the potential QE2 "air pocket" is approximately 1370 minus 1220 or 150 points.
Today's proposed equivalent 1930 level without a QE2 "air pocket" is 1020.
So far, the S&P has made a low of about 1100.
This would imply, all other factors being equal, that about half of the potential QE2 "air pocket" has already been removed from the stock index.
The other rather large assumption in this would be that while QE2 was in operation that the cycle more or less stood still. In other words, while April 1930 was equivalent to April 2010 before QE2 (and a 2012 low comparable to the July 8, 1932 Dow low would have been expected without QE2) that today is still more or less equivalent to 1930 (and a 2013 low can now be expected). This could be a major flaw in this analysis. If today is really equivalent to 1931, there could be a very large and violent crash. My bias is the probability of that is very small, probably under 2 percent.
While the periphery breaks down rather slowly at first, the capital cities of the hegemon should collapse suddenly and violently.
I concede to your observations. I convey the gradient is the social dynamics we trend.
We agree the taxpayer is not amused and business is trying to be linear on output or to say
overhang built in by lessons learned. Now if Washington can do math and the voters sweep these interests out?
I posit lag not lead, or to say consequences of ideologues. We just make products for the Customers. http://en.wikipedia.org/wiki/List_of_re ... ted_States
Last edited by aedens on Thu Aug 11, 2011 2:55 am, edited 1 time in total.
Speaking of which, the stock market peaked in March 1937 while the NBER puts the start of that recession in May 1937. Which is one reason I am not expecting any QE2 air pocket to come out all at once as the crisis learning process appears to be a gradual one. But it's still my guess that absolutely nothing has been learned to date and the crisis is just beginning to hit with full force, more similar to 1930 and/or 1931 (as most of us told Lily).
While the periphery breaks down rather slowly at first, the capital cities of the hegemon should collapse suddenly and violently.
If it follows the pattern it's established over the last few drops, we'll see a smaller drop today, with a rise in the last hour or two of trading. (It's Thursday here.) Friday would be more stable, with a rise in the last couple of hours of trading to finish the day on the upside as much as 150 - 200 points. That would start a rally on Monday which would continue for a period before the next drop.
That's what I'm expecting to see, as a total bystander in this mess of a market.
The mindset is not that hard to follow. Poisoned Well. Taxpayers are wising up so the election will be interesting.
Vin is correct "Figure out who’s the mark and don’t be there."
The equity market will stay in a state of agitated suspension as stock fundamentals and low relative valuations face off against enduring macro risks and sluggish growth prospects. This is a Wolf Market, not a bull market and not a bear market. h/t trader
We already warned. Rent them. Vanilla will get slaughtered. http://www.nytimes.com/2011/08/12/busin ... .html?_r=1
