Spot the Difference
Published on February 2, 2010
Published on February 2, 2010
Does this rebound represent the start of a new leg higher in the uptrend dating from the March 2009 low or is it a temporary reaction to short term oversold conditions for bear market rally that topped in Jan 2010?
You may make the argument for both the cases.
Here is the first and simple one- Both Dow and S&P 500 were down 3 weeks in a row as of last Friday’s close. Those Indexes have not produced a 3 week decline since the 4-week drop in June-July 2009. Thus, both Indexes appeared to be in short term oversold state and hence the market appeared due for a bounce. Going forward volume will be a key to watch.
How about arguments for the 2nd case i.e. a short-term pause in the bear market rally that might have topped in Jan 2010?
This puzzle probably may be one of the most profitable “spot the difference” puzzle that you might have solved since the childhood. Here are 4 interesting charts of the Dow Jones Industrial Average that covers two historically important time periods i.e. The 1929 Crash and Rebound and The 2007 crash and rebound in two different time frames; monthly and weekly.
The top two charts are monthly charts. Key points are-
You can find a lot more similarities and differences vs. that time. In the current global village, money has been poured like never before; governments are acting in a bigger and better coordinated effort (at least short term). However, from a technical perspective, here are my takeaways that I think one should evaluate when making investment decisions in the coming weeks.
All this is not to predict what lies ahead. Treat this as an additional data point that might be useful when making investment decisions in the short term. It is a critical point and it might be worthwhile waiting for sometime to see how markets unfold in the coming weeks.
Trade Carefully, Trade Profitably, OP
I would like to see the charts you have posted but they’re too small to read and when I try to blow them up they’re fuzzy.
Thanks