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oldfashionedway (38.12)

ridges, troughs, and other meteorological terms

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7

August 18, 2009 – Comments (2) | RELATED TICKERS: SPY , DIA

While pondering the ongoing debate, 'Are we in a Bear Market rally or is this the beginning of a new Bull Market run', I pulled up a ten year chart of the SPY index, (which is very easy for even a financial and computer novice like myself, courtesy of the brilliant people at TMF).  I then simply added the 200 day moving average, which produced a line with two distinct 'ridges' and two corresponding 'troughs'.  A similar correlation is evident with a chart of DIA.

Is it a gross over-simplification to assume that we may actually be at the beginning of a multi-year uptrend for the broader market?  Or should I leave the interpretation of charts to those who analyze much shorter time frames and individual stocks?  The 'attention span' of the average trader is incredibly 'short' these days (pun intended). 

I have always been of the opinion that charts simply document historical data, and are of little use for consistently predicting future market moves.  However, I will concede that 'history' can be cyclical, occasionally repeating itself, and those that are ignorant of financial 'history' are apt to repeat it, usually finding themselves poorer for their lack of information.

Just hoping to start a dialogue, and learn a bit from those wiser than myself.

Disclosure: long commodities (BHP, PWE, CEF, XME)

2 Comments – Post Your Own

#1) On August 19, 2009 at 12:36 AM, NOTvuffett (< 20) wrote:

Interesting post.  Maybe those that study history of the market are more apt to repeat it because they think it will work as it did before, a sort of self-fulfilling prophesy.

Meteorlogical terms? This could be the eye of the storm, or there could be smooth sailing ahead, time will tell, lol.

 

 

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#2) On August 19, 2009 at 1:34 AM, TMFJake (53.39) wrote:

Here's another interesting chart that compares our current market downturn with prior market crises:

It creates an interesting point of comparison with the chart you reference in your post to determine whether we're beginning an upward trend or have further to fall:

If we want to use these charts as our guide, then I'd say that we're much more likely to see flat to somewhat of a pullback with a dramatic pullback still a very real risk.

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