For most of the selloff and recovery, I have mentioned that my favorite market analogy to our current situation has been 1973-74, which had a 55% collapse and 74% snapback rally.

However, as this market has continued to power higher, it has left 1973 behind, and is looking more and more like the Great Panic of 1907:

1973-75 Market versus 2008-11

Click for bigger charts


1907-09 Market versus 2008-11

All charts courtesy of The Chart Store

Category: Cycles, Markets, Technical Analysis

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

18 Responses to “Best Market Analogy: 1973 or 1907 ?”

  1. dead hobo says:

    In a few years when the next panic arrives, will you compare it to the panic of 2008?

    When the 1975 panic arrived, which panic were the chart masters comparing it to?

    At what point in time were panics considered to be recycled and not unique events for unique reasons?

    Why not cherry pick panic parts? Why not take the first 1/2 of 1907 and the last part of 1975 and proclaim this one can be predicted by past panic parts combined and reanimated into panics of the living dead?

  2. cognos says:

    When the market continues to go up… which is the next “double dip” you will compare it to?

    RIP to “double dip”. Who is buried in that crypt? — Rosenberg, Meredith Whitney, Roubini, a bunch of Tiger cub funds down 10-30% in 2009, 2010 or both. El Erian and Pimco should be… but Q1 GDP print is giving them a last gasp of intellectual credability on “New normal”. Will also simply strangulate and we proceed to the next boom.

    Boom to Bust — its like the circle of life. Both need each other. It has to be that way.

  3. nofoulsontheplayground says:

    The 1907 pattern assumes a fall 2011 low, which would fall into seasonal patterns for lows. While it is doubtful we’d have QE3 starting prior to January 2012, we could see an announcement from Bernanke which would be similar to the August 2010 Jackson Hole speech that foreshadowed the start of QE2.

    There was a 5-1/2 month lag between the end of QE1 and the Jackson Hole speech, and less than a 5-month lag from the end of QE1 to the beginning of QE1.5 rollover program.

    Assuming we are in a topping process this month, that would put a potential Jackson Hole 2 announcement in the window that would fit the fall low for the 1907 recovery pattern.

    On another note, it’s quite remarkable that World Sugar is back trading close to the $20 area where it launched last fall. It’s no longer in backwardation either. Cotton is still being smashed down, but is still in backwardation. A lot of hot commodity money has moved out of some of the higher beta commodities.

    Industrial metals are the tell for the real economy, and they are still in corrective mode here.

  4. Trevor says:

    While the similarities are many, isn’t this a case of trying to use the past to predict the future?

    In and of itself, the shape of and the location on the job loss chart that you showed on Saturday would seem to be more indicative of possibilities for the rest of the year and early next year. The market and jobs may not move together, but, surely, increases in jobs help consumer and retail investor confidence?

  5. PeterR says:

    SPX 1550 here we come? [2nd chart at link above]

  6. Transor Z says:

    What’s up with the Miami Dolphins colors?

  7. jpmist says:

    Compare a 3 year chart from 2/02 to 2/05 , to 6/09 to now, it’s also a pretty close match . . .

    It’s not so much using the past to predict the future as it is observing the similarities in how the market reacts to severe declines. The fundamentals behind each series is different but fear and greed never changes.

  8. DL says:

    Also worth considering Fed policy, ’74-’75 versus now.

  9. Andy T says:

    So, that rally in 1908 occurred PRE-Federal Reserve.

    How did we ever surve without the Fed? How’d the market ever rally without the presence of the All Powerful Oz?

  10. dead hobo says:

    Why don’t you have your chart guy come up with an AVERAGE history and compare 2008-2011 to it?

    For every daily or weekly point, average them from history and graph the average. Let’s see THAT comparison. It MIGHT have some credibility if some all panics have some consistencies.

    Given the different levels, the starting point might require a numeric multiplier that is applied to all relevant data points in the same graphical representation.

    Try it and see if it works.

  11. Patrick Neid says:

    Both suggest a sell off…soon.

  12. ben22 says:

    Markets are fractal, tough concept for some of the readers here apparently.

  13. crunched says:

    1907. The last third of the 1907 run-up left the market overextended as it is now, thus a sharper, more panic tinged sell-off. It looks like the 1976 move simply rolled over from what had already become a period of malaise and buying exhaustion.

  14. philipat says:

    If either, it would suggest that a correction of about 25% is imminent?

  15. ricecake says:

    If you take population growth trend to coordinate with the stock market growth trend, you seem to get the answer why history will never repeat in the same way, may be. No? (Plus the scale of modern money printing, plus China, India, Asia, Turky, and Africa emerging markets etc etc.), Times are different people are different we have much much bigger economy and more technology ever than before.

    1907 1.7 billion people

    1974 3.9 billion

    2009 6.8 billion.

  16. [...] – Are markets in 1973 mode, or 1907? [...]

  17. honeybadger says:

    Some really good comments here about how the charts do not capture “the truth.” Barry, looks like your charts did exactly what they were supposed to do, promote some deeper thought about the current situation. Thanks!

  18. Thatguy says:

    Honeybadger?!?!? Is that you??!?