Fine or Five?
Bulls say everything's fine.
We say it's five, because it's not different this time.
It's never different because human nature is immutable and is fundamentally what drives markets, not market fundamentals.
History repeats.
Here it is in chart form:
The red arrow shows where we are now.
We marked the top as January 2018 in greedy green and the subsequent high as October 2018 in Hallowe'en orange because the following should absolutely terrify anyone running on debt and long equities.
As always on this blog, click any graphic to see it in large form:
The chart above covers 4 decades. It's a proprietary study of movement in major stock markets over time.
1. 41% drop. A primary plunge.
2. 22% drop. Secondary slide. A lower high and low in this indicator, relative to the previous plunge.
3. 38% drop. Major market meltdown after a higher high, down to a lower low vs. previous cycle in this indicator.
4. 54% drop. Minor market massacre. Lower high and low in this indicator relative to previous meltdown. Same relationship as 2 had to 1.
5. It's not different this time. Same relationship apparently developing to 4 as 3 had to 2; higher high, then ...?
"Only" a 22% drop targets DJIA ~22100.
An average of the 4 drops is ~39% which projects DJIA ~16500.
A much lower level shouldn't surprise.
In any case it's a very long way down, and we'll continue to enjoy the ride.
We say it's five, because it's not different this time.
It's never different because human nature is immutable and is fundamentally what drives markets, not market fundamentals.
History repeats.
Here it is in chart form:
We marked the top as January 2018 in greedy green and the subsequent high as October 2018 in Hallowe'en orange because the following should absolutely terrify anyone running on debt and long equities.
As always on this blog, click any graphic to see it in large form:
The chart above covers 4 decades. It's a proprietary study of movement in major stock markets over time.
1. 41% drop. A primary plunge.
2. 22% drop. Secondary slide. A lower high and low in this indicator, relative to the previous plunge.
3. 38% drop. Major market meltdown after a higher high, down to a lower low vs. previous cycle in this indicator.
4. 54% drop. Minor market massacre. Lower high and low in this indicator relative to previous meltdown. Same relationship as 2 had to 1.
5. It's not different this time. Same relationship apparently developing to 4 as 3 had to 2; higher high, then ...?
"Only" a 22% drop targets DJIA ~22100.
An average of the 4 drops is ~39% which projects DJIA ~16500.
A much lower level shouldn't surprise.
In any case it's a very long way down, and we'll continue to enjoy the ride.
posted by C. Guinness @ 5:34 PM
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