Thursday

Current Bear Market Road Map

1 Comment October 29, 2009 – 12:11 pm |   | Permalink |  Print This Post |

A striking similiarity exist in our comparison of bear market charts since 1929. Despite everyone comparing this decline to 1929, or Japans 1989 decline, the 1937 decline comes very close to the current decline. So we have zoomed in and compared the two:

www.theinflationist.com

www.theinflationist.com

A shift to the left by about 80 days would fit nicely. Based on the 1939 scenario, the roadmap forward would be:

1. At current Dow levels of 9800, the Dow is at -30 in the chart above. Target for the current decline would be 9000.

2. Then a final rally up to 11200 (-20%) before declining again in a zig zag manner.

3. The bottom was hit at day 1283. We are now at about day 400. That would mean the final low will be in early 2012.

Close up of Equivalent Peak in 1937

Close up of 1937 Bear Market Rally by www.theinflationist.com

This was the first bear market peak in 1937 (equivalent of current S&P peak 1100)

The S&P declined from 1100 to 1041. Currently at 1051.

It went sideways for about a month (35 days) , retesting the peak.

To be safe, we will only short as close to 1100 as possible. Since we already have so many shorts, we will hold fire. Aim to release shorts as close to 9000 as possible.

www.theinflationist.com

www.theinflationist.com

Looking at another close up of the 1937 comparison with the current bear market rally, it is possible that we have peaked.