# A Very Scary Chart



## Zander (Jan 10, 2010)

As you can see, all labels, dates and prices have been removed. One of the above charts dates back to a period encompassing parts of 1929-1930; the other shows a more recent picture.  I'll let you guess what happened in  march of 1931........


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## Toro (Jan 11, 2010)

A 52% retracement is not uncommon.  According to technicians, you will find retracements throughout market history, not just in 1930.

What is Fibonacci retracement, and where do the ratios that are used come from?

To compare today to 1930, one must understand what happened in 1930.  In the fall and winter of 1930, the country experienced a wave of bank failures, which caused a withdrawal of deposits and reserves from the banking system, marked by the failure of The Bank of the United States, which many foreigners thought was the Fed.

Bank of United States - Wikipedia, the free encyclopedia

The ratio of currency to deposits in the summer of 1930 was quite low, meaning that even nearly a year after the 1929 crash, people still had confidence in the banking system.  By 1932, the ratio of currency to deposits was at highs as people pulled their money out of the system.  Bank reserves fell by a third.  Nearly half of all financial institutions failed.  What was really interesting was that depositors did not discriminate based on financial strength of the bank.  Banks that were rated as strong as the average bank or even stronger failed at a greater rate than weak banks as depositors panicked and withdrew from the system.  This lead to the creation of the FDIC, of which both Milton Friedman and Ben Bernanke attribute to the bottom of the Great Depression.

Today's environment is very different.  Whatever one might think of the government's policies, the government is responding with a direct eye on what happened to the financial system in the 1930s.  Today, bank reserves are at all time highs and the number of bank failures have been limited, about 150 compared to 1600 that failed during the S&L crisis and 4500-5000 during the Great Depression.  

That does not mean that we aren't topping here and the market will not fall, but the analogies to the Great Depression must be understood in the context of the responses of the governments, which have been very different.  

Of course, what the government is doing is inflationary (which is why I bought a bunch of silver options a few weeks ago), and will certainly have unintended consequences down the road.  But right now, the government's actions are buoying asset markets around the world.  FYI On March 10, the S&P 500 bottomed at 667.  On Friday, it closed at 1145, a 67% gain.  The bounce in the Dow in 1930 was a 50% bounce.


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## Paulie (Jan 11, 2010)

I think it would be rather naive to use a chart pattern from _80 years ago_ as any kind of current technical indicator.

That both charts look rather similar, really shouldn't signal any kind of _definitive_ continued similarity.  After 80 years, not to mention the differences Toro stated, it's pretty tough to assume the pattern will automatically continue to match.


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## Zander (Jan 11, 2010)

Paulie said:


> I think it would be rather naive to use a chart pattern from _80 years ago_ as any kind of current technical indicator.
> 
> That both charts look rather similar, really shouldn't signal any kind of _definitive_ continued similarity.  After 80 years, not to mention the differences Toro stated, it's pretty tough to assume the pattern will automatically continue to match.



Maybe, maybe not. The chart price patterns are eerily similar,  as are the economic  conditions we face.  The past has a way of repeating....

Of course, you can and should do whatever you want, it is your money and your life. Personally, I am sitting 100% in cash.  I believe we are about to enter Elliot wave 3 of the current downturn.  Wave 3 patterns are strong and fast.  I believe the US stock market is going to fall harder and faster than it did last year.    If I am wrong, I will  make a little less money, not a big deal. I value safety far more than return right now.  But if I am right, I will make a very large return for relatively small risk.  Either way, I will be sleeping very well at night.  

Best of luck!


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## xotoxi (Jan 11, 2010)

I have no idea what you guys are talking about, but I wanted to post in this thread.

Thanks.


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## hvactec (Jan 18, 2010)

Yes Marc Faber prediction that the market is not going to be pretty in 2010


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## william the wie (Jan 19, 2010)

Zander said:


> Paulie said:
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I agree with your conclusion but LEAP collars are the way to play. there are a lot of head fakes ahead of us and covering prior to Nov.1 could hurt you. When the market moves buy another collar on the assumption that the Fed will intervene and might be temporarily more successful than you expect.  Eventually the pain will be too great and the market will drop but you have no way of knowing when. Your highest puts will bring in the most money on the downside and your lowest call the most on the upside. The wildcard is a flight to safety if there is another sovereign default.


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## mal (Jan 20, 2010)

Zander said:


> As you can see, all labels, dates and prices have been removed. One of the above charts dates back to a period encompassing parts of 1929-1930; the other shows a more recent picture.  I'll let you guess what happened in  march of 1931........



If you are Hoping for a Crash, you can Find Data to Support your Delusions...

Congratulations on that.

I bet you didn't Predict the Market going back up to the Mid-10's when it was Dumping and we were Losing 700,000 Jobs a Month...

Spring's coming... Jobs will be Created... Growth will Happen. Nothing like Clinton and (43) Years, but Growth and Job Creation all the same.

The 15 Years of Irrational Exhuberance that was Fuled by PISSPOOR Lending Policies and Inflated Home Prices, along with Individual Citizen and Business Greed, will NOT Repeat itself unless another Computer/Tech Style Boom happens...

Whatever that thing may be.

Until then, Learn to Live Moderately... It's the Right thing to do.

The Me Generation is going into Nursing and Longterm soon, and their Spawn will be Fantastically Appauled at thier Lack of Inheritance...

Get a Helmet and get a Job...

Nobody's above Working at Walmart.



peace...


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## Zander (Jan 21, 2010)

tha malcontent said:


> Zander said:
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> > As you can see, all labels, dates and prices have been removed. One of the above charts dates back to a period encompassing parts of 1929-1930; the other shows a more recent picture.  I'll let you guess what happened in  march of 1931........
> ...



Actually  I did predict the upturn in March of last year and profited from it. I liquidated on August 30th- locking in about 90% of the rebound. It has been essentially sideways since then. 

PS-  I don't use fundamental analysis, I rely on Elliiot Wave patterns. Those technical charts are indicating that we are in for a major decline. Actually, it is not major, it is EPIC. Good luck!


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## Paulie (Jan 21, 2010)

Well Zander, if you're right, I'll be ready and waiting to buy some more equities near the bottom!  DOW 6600 and S&P 660 will be strong supports.  

Do you think we're going to break those?


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## Zander (Jan 21, 2010)

Paulie said:


> Well Zander, if you're right, I'll be ready and waiting to buy some more equities near the bottom!  DOW 6600 and S&P 660 will be strong supports.
> 
> Do you think we're going to break those?



It is possible, we will have to wait and see how the chart develops. I will share my thoughts with you as we go along.


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## Paulie (Jan 21, 2010)

Zander said:


> Paulie said:
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I'm just not sure we're going to fall that far without some kind of horrible economic news.  At this point most people think we're at least done bleeding, if not "recovering".

The excess liquidity is propping up the banks' balance sheets now.  There doesn't seem to me to be anything that exists to realize another meltdown.

We're looking at stagflation, at the worst, if you ask me.


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## mal (Jan 21, 2010)

Zander said:


> tha malcontent said:
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That's why I am Heavily Invested in Lead... 

Do you have Link to your Predictions?...



peace...


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## Zander (Jan 21, 2010)

Paulie said:


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 Paulie,  I have been using charts and the Elliot wave theory to track the market for 23 years. The last time I had as strong a confirmation of direction was in 1987. I had just started using the EWT and I couldn't believe what it was indicating - it was indicating an exceptional  strong move to the upside that would last a number of years. Now I have almost the same chart patterns - in reverse. We are in for a severe decline that could last as long as 4 years. 

 I don't waste time on fundamental analysis fallacies, they are almost always wrong. Fundamental analysis is only accurate AFTER the fact. It is a rearview mirror that attempts to explain why things happened......Best of luck!


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## Zander (Jan 21, 2010)

tha malcontent said:


> Zander said:
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I told everyone here that I was going to cash on August 30th. I have been totally consistent.  I think we are in for a massive deflationary wave that will see commodities, stocks and real estate all fall.  The only safe asset will be CASH, T-bills, Hard assets purchased in the past (non numismatic gold and silver coins, bars etc), demand accounts at SAFE banks...

Trust me, I get no pleasure from being this bearish, I have long been an optimist!! 

PS- this had nothing to do with politics....


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## Paulie (Jan 21, 2010)

Zander said:


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There has to be a catalyst to start the huge sell-off.

Unless the big boys, i.e. the banks (who have no doubt been playing with their excess liquidity) start a massive sell-off, where is it going to come from?

Your technical analysis would have to rely upon the overall psychology of the market as a whole that what you say will happen, will HAPPEN.

Everyone would have to be expecting it right along with you, otherwise there could very well be a lot of resistance to the crash.

If you're betting that everyone is on board with your TA, then good luck to you.  I just can't see it happening.  Not YET at least, anyway.  

As soon as the banks open their wallets, there will be inflation and continued equity and commodity buying.


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## Zander (Jan 21, 2010)

Paulie said:


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I'll be watching to see what happens, but so far, this is shaping up to be the largest decline in stock market history. I could be wrong, I often am. If I am wrong I will make a little less money than stock investors. I can live with that.  If I am right I will have plenty of "dry powder" to buy whenever we hit bottom.....Good luck!


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## Toro (Jan 21, 2010)

I use both fundamental and technical analysis.  Both can make money if used properly.


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## william the wie (Jan 21, 2010)

I expect a decline to about 9.5-10K, a rise to 10.5-11K and then a drop to about 6.5-7K so I am doing a lot of dynamic hedging.


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## Big Fitz (Jan 21, 2010)

So... for those of us living paycheck to mouth.  How fooked are we?


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## william the wie (Jan 22, 2010)

Pretty thoroughly and stealthily.


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## Old Rocks (Mar 13, 2010)

Hmm.....  Most posts on 1-21-10. 

So here we are at 13Mar10, and the market is 10,600 or so. Not great, but not bad. Economy is slowly improving. Some jobs coming back. A long slog back to reasonable prosperity.


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## mal (Mar 13, 2010)

Zander said:


> As you can see, all labels, dates and prices have been removed. One of the above charts dates back to a period encompassing parts of 1929-1930; the other shows a more recent picture.  I'll let you guess what happened in  march of 1931........



A Very Smelly Fart... 



peace...


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## Toro (Mar 14, 2010)

Old Rocks said:


> Hmm.....  Most posts on 1-21-10.
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> So here we are at 13Mar10, and the market is 10,600 or so. Not great, but not bad. Economy is slowly improving. Some jobs coming back. A long slog back to reasonable prosperity.



Liquidity-Fueled Rally Explodes Higher - Toro's Running of the Bulls Market Blog
The Asset-Driven Economy and the Market - Toro's Running of the Bulls Market Blog


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## Paulie (Mar 16, 2010)

Zander what's your current position these days?

You still out of equities and in cash?


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## Zander (Mar 16, 2010)

Paulie said:


> Zander what's your current position these days?
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> You still out of equities and in cash?



100% T-bills and cash,  and sleeping very well.


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## Paulie (Mar 17, 2010)

Zander said:


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I just have a hard time believing that a significant drop in the market is going to happen when we're getting close to primary season for this year's mid terms.

The dems have too much to lose in that case, and I'm sure they have tricks up their sleeves.

We'll see though.


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## Zander (Mar 17, 2010)

Paulie said:


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Markets drop without reason. No fundamental reason required. I don't really care what happens. I see danger in all the markets and value preservation of capital over growth (or loss!) at this time. If I am wrong, big deal, I make a little less money. At least I won't lose any. Best of luck!


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## Neubarth (Mar 17, 2010)

Paulie said:


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  I keep on telling people that the market will go down when Goldman Sachs wants it to go down.  Obama wants the market up and Goldman has delivered.  Still, Goldman is usually most loyal to the Republicans, and they want it to go down to create the impression that Obama is a total dufus.  Watch and see what happens and when it happens.  If there was a way of knowing when Goldman had all of their market shorting derivative positions in place, THEN, I would short the market will everything that I have, but I won't do it until I feel that Goldman is ready.  They actually can run the whole show.


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## Paulie (Mar 17, 2010)

Zander said:


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Normally I wouldn't weigh my investment decisions based on partisan politics of all things, but I think this particular election cycle is going to make all the difference.

If the dems retain most of their seats, I expect to see a significant drop in most markets.  Conversely, if the republicans take a bunch of new seats and kill the dem majority, I expect the market to react very favorably to that.

Right now, capital isn't sure if we're looking at a long stretch of socialism or not.  A retained dem majority would pretty much ensure that, though.


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## Paulie (Mar 17, 2010)

Neubarth, you definitely won't find me in disagreement with that.  Goldman is the biggest player, but I don't think broad market manipulation can be achieved adequately with JUST Goldman, though.


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## Modbert (Mar 17, 2010)

Paulie said:


> Neubarth, you definitely won't find me in disagreement with that.  Goldman is the biggest player, but I don't think broad market manipulation can be achieved adequately with JUST Goldman, though.



If Neubarth was right at all, shouldn't this country have collapsed by now?


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## uscitizen (Mar 17, 2010)

The world is different now than it was during the great depression.
We are in a global economy and the rules and regulations need to be changed to reflect the changes we have had.  

We do not depend on nidustrial output now as we used to.  We depend nearly 75% on US consumer spending.  with our trade defecit and offshoring of jobs and industry the way we are now cannot and will not continue.

We must change or wither away.

Just my opinion based on a life of observation and experience.


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## Paulie (Mar 17, 2010)

Dogbert said:


> Paulie said:
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You don't have to be right about _everything_ to be right about _something_.


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## uscitizen (Mar 17, 2010)

Dogbert said:


> Paulie said:
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The US economy is a massive thing even at a low poinnt.  We run for quite a while just on inertia.

Our current situation was inevitable, and we may well never fully recover unless we change the way we do things.

More of the same is the worst thing we can do right now.


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## Modbert (Mar 17, 2010)

Paulie said:


> You don't have to be right about _everything_ to be right about _something_.



Never said you had to be right about everything. I'm merely saying if half his predictions came true, wouldn't America have been destroyed by now?

I'm asking a honest question, no malice behind it or anything. I just noticed there's a sharp contrast in posts in this section.


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## Paulie (Mar 17, 2010)

Dogbert said:


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I don't really know, Dog.  I'm a bear in the long term, but even I don't agree with his doomsday posts.  

However, this time he posted something I agree with.


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## mayya555 (Mar 22, 2010)

We're all gonna die ... or at least we'lre all gonna go bust...


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## editec (Mar 22, 2010)

Zander said:


> As you can see, all labels, dates and prices have been removed. One of the above charts dates back to a period encompassing parts of 1929-1930; the other shows a more recent picture. I'll let you guess what happened in march of 1931........


 
Interesting.  Wish they'd give up a timeframe to truly measure the similarities, though.

Do you know what year the DOW finally achived it's Oct 1929 high?

As I recall, it was about 1956.

I do not expect the Dow to take 27 years to achived it's high this time around.

Economic history really doesn't repeat itself any more than history repeats itself.


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## william the wie (Mar 22, 2010)

editec said:


> Zander said:
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Probably right with one strange provisio investors like round numbers on the Dow: 100, 1000 and 10K +/- 10% are psychological sticking points. Major up moves will not be seen until enough killer apps accumulate to make a 10-15 year sprint to DJIA=100K feasible but a 1-2 year downside test of 1000 or even 100 requires only fear and leverage at most. Usually the Dow = 1/oz of gold is a very solid bottom but gold seems to be having a cyclical bear downturn within a longrun bull market. I would not put it past either the Fed or the current administration to try to lower gold prices during a market crash so a DJIA = $100 is my target.


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