Short Term Trading forex trading links forex trading books market statistics trader values euro and us dollar Shocks Crashing Are Stocks About to Crush Again? No, but....

Thursday, 28 July 2011

Are Stocks About to Crush Again? No, but....

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, tops were touched every 3/4 years, while bottoms reached every 3/5 years. Movements 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 14000/7000. The last uptrend started at around 7000 and is currently at 13000. As a result, time and space are beginning to converge in this hypothetical consolidation model approach.

Dow Jones Industrial Patterns, 1900-2011.
Major Tops
35-36years
Consolidation
Top to Bottom
14-17 years
Tops In
Consolidations
3-4 years
Bottoms In
Consolidations
3-5 years
1929 -00y
1965-36y
2000-35y
1906-1922 -16y
1936-1950-14y
1965-1982-17y
2000-

1906,1910,1913,
1916,1920
1936,1940,1943,
1946
1965,1969,1973,
1977,1981
1904,1908,1912,
1915,1918, 1922
1933,1938, 1942,1946
1970,1974, 1978, 1982


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