Chart-master Doug Short observes that the behaviour of the market since August 2008–a violent 50% plunge followed by a major recovery–almost perfectly tracks the market’s behaviour in the year after the peak in 1929.
Of course, our current bear market started in 2007, not August 2008, so this pattern comes in the middle of our crash, not the start. But the similarity is still startling.
Here’s hoping the current bear market doesn’t continue right on down to the -89% of the 1929 crash. Because from the top of our bear market, way back in 2007, that would mean a fall of more than 95%.
Here’s Doug’s writeup. Click through for bigger charts:
I wonder what the Mega Bear chart or Four Bad Bears chart would look like if you started this decline in the fall of 2008. It seems that the decline would be right on top of the 1929 decline. Have you looked at the charts that way?
Good question! Let’s take a look. As this overlay chart shows, the Dow Crash of 1929 began with a precipitous drop in the first few weeks of the bear market. The current bear experienced a similar cliff-dive, but since it happened nearly a year after the start of this secular bear, it didn’t have the same immediate shock effect.
When we overlay the two charts so the September 2008 cliff dive aligns with the 1929 crash, the similarities are more apparent.
These two bears probably wouldn’t win a simultaneous diving competition. The older bear does a simple swan dive to -47.9% while the younger one incorporates some fancy flips and lands a bit farther out at -48%.
On a more serious note, since the recent cliff dive didn’t happen until 10.6 months after the 2007 market peak, the “delayed shock syndrome” obscured the severity of the decline for many investors.
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