Is it 2004 or 1975?
It’s often been said that history does not repeat, but it rhymes. So what was this nursery rhyme last time we heard it?…
A lot of folks have compared this particular market to 2004 (including me) when we came out of the last downturn. There is much to recommend that idea. We’d had a plunge, and a rapid recovery. Then a ‘flat rolling sideways’ segment.
This chart is the NYSE or New York Stock Exchange all listings for the most recent decade. Notice that 2004 segment about 1 1/2 years from the first dip.
But there is something wrong. The “pace” of recent change is more violent. As much as 2000-2004 was a challenge, it was not at all as volatile nor as gut wrenching as the last year or two. Was there another time that ‘looks’ more like this? I tried 1987. While it is a violent market break, it does not have the same pattern. More of an airpocket in the middle of a long expansion. But I did find a match.
Compare with a similar present 5 year view:
It actually looks a bit closer to the 10 year chart pattern in this log scale chart ( which implies we are running a bit slower in pace now, believe it or not…) So compare the ‘plunge’ in this chart with the one way up top.
That too was a time of rapid change. We had the leaving of the gold standard, the Arab Oil Embargo, and a general disruption of the world markets.
So what does this imply for us now? Take a look at what happened after that recovery last time. 2 years of drifting downward. So looking at RSI, MACD, DMI it looks to me like we’re about the start of 1977 as the closer fit. Perhaps we have simply skipped whatever caused that late 1975 hiccup to the downside (or perhaps, we’re in the middle of having one).
But it’s not a repeat, it’s a rhyme…
So this chart just advises me that I ought not to expect a return to rising, and ought to be prepared for rapid drops, rapid rises of short duration, and a generally dropping trend for the next couple of years.
If past is prologue…