Are Stocks About To Crush Again? No, But....

crushed car

Photo: ucffool via Flickr

The image of the stock indexes falling is still vivid in minds, as decades of growth evaporated in only few weeks.With the economy only timidly recovering from the ashes, a question is still unanswered:”Will it happen again?” Only time will tell.

However, it appears clear the long-lasting trends of the 90′ are over. The stock indexes are oscillating within boundaries. A top might be nearing, if history repeats itself.  Let us see why.

Over the last 100 years, the Dow Jones Industrial has topped roughly every 35 years followed by long period of consolidations that lasted for 14/17 years. Within these lateral movements, top where hit every 3/4 years, while bottom reached every 3/5 years.

Movement extended roughly 50% from bottom to top and from top to bottom.  Bottom to top moves lasted instead for about 2/3 years, while top to bottom for 1-3 years.
How it applies to the current economic scenario?  Well, the DJI topped in 2000 and 2007.  It bottomed in 2002 and 2009. The max/min of these boundaries is 14000/700. The last uptrend started at around 700 and is currently at 1300. As a result, time and space are beginning to converge in this hypothetical consolidation model approach.


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