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Mark910 (< 20)

Answer= Greater than 2 years and Cascading Parabolas

Recs

23

May 17, 2009 – Comments (2) | RELATED TICKERS: LOW , E , R

Question= If you research all major stock market corrections what similarities do you see.

1.Time greater than 2 years-

After an in depth research project looking at all the major corrections in all stock markets that I could get data on, I found a startling similarity which does not bode well for our current correction.  In large corrections of about 40% or more, none lasted less than 2 years.  The market Psychology of this could be argued that it is hard for the perception of value in a bubble by a large populace to change any faster than the mentioned time period.  Regardless of the reason our current correction which definitely fit the criteria of >40% is less than two years old and therefore I argue, not completed.

2. Cascading Parabolas-

It was also interesting to note that they all fell in a series of what I am calling Cascading Parabolas.  Meaning that the market reaches a series of slower ,often rounded tops that roll over into precipitouse falls; and then sharp rise to start the proceess over again.  However each successive top and bottom is lower than the previouse one.

Conclusion-

We have a minimum of 2-4 months left of correction with a maximum of several years (if we dicount the Japanese crash).  By overlaying the current S&P chart with the Nasdaq bubble chart one is immediately struck by the similarities. And it says we have either one or two cascading parabolas to go. 

In plain English I am say we will not only test the S&P 666 bottom, but may even hit as low as 500.  I don't wish this and am not happy with it but it is how I see it.  Best Wishes in your investments.

2 Comments – Post Your Own

#1) On May 17, 2009 at 7:00 PM, binve (< 20) wrote:

Mark,

I agree 100% with your premise and observations. I think there is a potentially different scenario in how it plays out in the near term, which I talk about in the post I just uploaded, but I agree with your ultimate conclusions: 666 is not the bottom and 500 is a very likely test point based on the long term fundamentals and technicals.

Thanks for the post man!

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#2) On May 18, 2009 at 8:55 AM, russiangambit (29.16) wrote:

> Regardless of the reason our current correction which definitely fit the criteria of >40% is less than two years old and therefore I argue, not completed.

That is my observation too. The crisis was very deep and to expect it to be over and done and digested in a bit over the year is too optimistic. It seems that a bear market ends when both bull and bears quit in disgust. We have too much emotion in the market still.

At least, that was the case with the previous crash. ( I didn't get to experience others, I only looked at the charts.) People kept buying Nasdaq stocks, which looked very cheap. The bubble only ended when they stopped buying Nasdaq stocks and left them for dead. Now, substitute Nasdaq with financials. People are still buying financials, which means we are nowhere near the end. I 've seen so many posts about WFC lately. Just substitute WFC for Lucent.

Though, I do have to admit that all this "free" money is affecting the market. So, I expect a series of mini-bubbles from the stimulus, each one of them ending with a loud pop. The trick is to correctly identify the beggining and the end of the mini-bubble.

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