The Dow Jones Industrial Average is repeating a pattern that appeared just before markets fell during the Great Depression, Daryl Guppy, CEO at Guppytraders.com, told CNBC Monday.
“Those who don’t remember history are doomed to repeat it…there was a head and shoulders pattern that developed before the Depression in 1929, then with the recovery in 1930 we had another head and shoulders pattern that preceded a fall in the market, and in the current Dow situation we see an exact repeat of that environment,” Guppy said.
The Dow retreated 457.33 points, or 4.5 percent last week, to close at 9,686 Friday. Guppy said a Dow fall below 9,800 confirmed the head and shoulders pattern.
The Shanghai Composite is seeing a very rapid collapse, falling below 2,500, which suggests the major fall in the Dow, he added.
In the European markets, Guppy says Frankfurt's Dax is witnessing a different pattern to London's FTSE.
Guppy uses the broad trading band as measurement- giving the Dax a downsize target of 1,500. The same head and shoulders pattern seen in the Dow can also being seen in the FTSE, he added.
If that doesn't have you concerned, how about this story from the NY Times over the weekend:
WITH the stock market lurching again, plenty of investors are nervous, and some are downright bearish. Then there’s Robert Prechter, the market forecaster and social theorist, who is in another league entirely.
Mr. Prechter is convinced that we have entered a market decline of staggering proportions — perhaps the biggest of the last 300 years.
In a series of phone conversations and e-mail exchanges last week, he said that no other forecaster was likely to accept his reasoning, which is based on his version of the Elliott Wave theory — a technical approach to market analysis that he embraces with evangelical fervor.
Originating in the writings of Ralph Nelson Elliott, an obscure accountant who found repetitive patterns, or “fractals,” in the stock market of the 1930s and ’40s, the theory suggests that an epic downswing is under way, Mr. Prechter said. But he argued that even skeptical investors should take his advice seriously.
“I’m saying: ‘Winter is coming. Buy a coat,’ ” he said. “Other people are advising people to stay naked. If I’m wrong, you’re not hurt. If they’re wrong, you’re dead. It’s pretty benign advice to opt for safety for a while.”
His advice: individual investors should move completely out of the market and hold cash and cash equivalents, like Treasury bills, for years to come. (For traders with a fair amount of skill and willingness to embrace risk, he suggests other alternatives, like shorting the market or making bets on volatility.) But ultimately, “the decline will lead to one of the best investment opportunities ever,” he said.
Buy-and-hold stock investors will be devastated in a crash much worse than the declines of 2008 and early 2009 or the worst years of the Great Depression or the Panic of 1873, he predicted.
For a rough parallel, he said, go all the way back to England and the collapse of the South Sea Bubble in 1720, a crash that deterred people “from buying stocks for 100 years,” he said. This time, he said, “If I’m right, it will be such a shock that people will be telling their grandkids many years from now, ‘Don’t touch stocks.’ ”
The Dow, which now stands at 9,686.48, is likely to fall well below 1,000 over perhaps five or six years as a grand market cycle comes to an end, he said. That unraveling, combined with a depression and deflation, will make anyone holding cash “extremely grateful for their prudence.”
Yikes - and what is President Hopey/Changey doing about any of this?
Bullshit financial reform that wouldn't have stopped the 2008 crash from happening, let alone stop the next one.
No meaningful jobs bill or work bill.
Failed mortgage program.
And a refusal to cut his education "reform" program to keep teachers all around this country employed.
Let's be frank - President Hopey/Changey didn't create this mess, but he has done NOTHING to mitigate it, has done little to ease the pain caused by it, and has made sure the people who brought about the '08 collapse are still sucking up punch at the Wall Street punch bowl (and handing him campaign cash for 2010 and 2012.)
So when the collapse comes, if it comes, Hopey/Changey will be blamed for it, as will Dems.
It will be mildly unfair, as Reagan, Bush 1, Clinton, and Bush 2 all helped bring this about with decades of de-regulation and fetishization of the private sector as the cure for all social ills.
But if the above two predictions are even close to correct, people will be living in Obamavilles and Obama will go down with Herbert Hoover in the category of worst presidents ever.
Which won't be a bad thing.
Except for all the pain suffered by people, of course.
Not that Hopey/Changey gives a shit about that.