Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
What to Do NOW in Case of a Future Banking System Breakdown - 13th Nov 19
Why China is likely to remain the ‘world’s factory’ for some time to come - 13th Nov 19
Gold Price Breaks Down, Waving Good-bye to the 2019 Rally - 12th Nov 19
Fed Can't See the Bubbles Through the Lather - 12th Nov 19
Double 11 Record Sales Signal Strength of Chinese Consumption - 12th Nov 19
Welcome to the Zombie-land Of Oil, Gold and Stocks Investing – Part II - 12th Nov 19
Gold Retest Coming - 12th Nov 19
New Evidence Futures Markets Are Built for Manipulation - 12th Nov 19
Next 5 Year Future Proof Gaming PC Build Spec November 2019 - Ryzen 9 3900x, RTX 2080Ti... - 12th Nov 19
Gold and Silver - The Two Horsemen - 11th Nov 19
Towards a Diverging BRIC Future - 11th Nov 19
Welcome to the Zombie-land Of Stock Market Investing - 11th Nov 19
Illiquidity & Gold And Silver In The End Game - 11th Nov 19
Key Things You Need to Know When Starting a Business - 11th Nov 19
Stock Market Cycles Peaking - 11th Nov 19
Avoid Emotional Investing in Cryptocurrency - 11th Nov 19
Australian Lithium Mines NOT Viable at Current Prices - 10th Nov 19
The 10 Highest Paying Jobs In Oil & Gas - 10th Nov 19
World's Major Gold Miners Target Copper Porphyries - 10th Nov 19
AMAZON NOVEMBER 2019 BARGAIN PRICES - WD My Book 8TB External Drive for £126 - 10th Nov 19
Gold & Silver to Head Dramatically Higher, Mirroring Palladium - 9th Nov 19
How Do YOU Know the Direction of a Market's Larger Trend? - 9th Nov 19
BEST Amazon SMART Scale To Aid Weight Loss for Christmas 2019 - 9th Nov 19
Why Every Investor Should Invest in Water - 8th Nov 19
Wait… Was That a Bullish Silver Reversal? - 8th Nov 19
Gold, Silver and Copper The 3 Metallic Amigos and the Macro Message - 8th Nov 19
Is China locking up Indonesian Nickel? - 8th Nov 19
Where is the Top for Natural Gas? - 7th Nov 19
Why Fractional Shares Don’t Make Sense - 7th Nov 19
The Fed Is Chasing Its Own Tail; It Doesn’t Care What You Think - 7th Nov 19
China’s path from World’s Factory to World Market - 7th Nov 19
Where Is That Confounded Recession? - 7th Nov 19
FREE eBook - The Investment Strategy that could change your future - 7th Nov 19
Is There a Stock Market Breakout Ahead? - 6th Nov 19
These Indicators Aren’t Putting to an Economic Resurgence - 6th Nov 19
Understanding the Different Types of Travel Insurance - 6th Nov 19
The Biggest Gold Story Of 2020 - 6th Nov 19
Best Money Saving FREE Bonfire Night Fire Works Show Sheffield 2019 - 5th Nov 19
Is the Run on the US Dollar Due to Panic or Greed? - 5th Nov 19
Reasons Why Madrid Attracts Young Professionals - 5th Nov 19
Larger Bullish Move in USD/JPY May Just Be Getting Started - 5th Nov 19
Constructive Action in Gold & Silver Stocks - 5th Nov 19
The Boring Industry That Hands +500% Gains - 5th Nov 19
Stock Market Chartology vs Fundamentals - 4th Nov 19
The Fed’s Policy Is Like Swatting Flies with Nuclear Weapons - 4th Nov 19
Stock Market Warning: US Credit Delinquencies To Skyrocket In Q4 - 4th Nov 19
Stock Market Intermediate Topping Process Continues - 4th Nov 19
Stock Market $SPY Expanded Flat, Déjà Vu All Over Again - 4th Nov 19
How To Buy Gold For $3 An Ounce - 4th Nov 19

Market Oracle FREE Newsletter

How To Buy Gold For $3 An Ounce

Stocks Bear Market, Is This 1929 All Over Again?

Stock-Markets / Stocks Bear Market Aug 26, 2015 - 12:53 PM GMT

By: Austin_Galt

Stock-Markets

The Dow has been smashed over the last week which has brought out the usual doom and gloomer’s predicting Armageddon once again. There are several so called experts now predicting a 1929 style bear market.

Admittedly, it is hard not to get caught up in the emotion of days where the market sees a 1000 point intraday drop. So, is this really 1929 all over again? Well, for those that can’t be bothered to read the analysis, the short answer is no. Not as far as I’m concerned anyway.


To come to this conclusion, I analysed previous tops that preceded major crashes using the same set of indicators. The tops include those in 1929, 1987 and 2007. Then we will compare those tops to the current 2015 top.

Now I like to keep things simple by using my favourite upper and lower indicators being the PSAR indicator and Bollinger Bands and RSI and MACD indicator. Don’t get me wrong, there are many other more complex tools available but I’ve found this is what works for me. Add to that a reasonable understanding of market psychology which is obtained from many years staring at thousands of charts!

If a serious crash really is to occur then we are dealing with big picture stuff so we will use the monthly and weekly charts for the analysis. I’ll leave the daily charts for the whippersnappers.

So, let’s begin with the Big Daddy of them all, the 1929 crash.

1929 MONTHLY CHART

We can see a parabolic rise into the final high which is so often found at the end of bull trends. Check.

The Bollinger Bands show price heading straight to the lower band before bouncing back up to the middle band and then getting smashed again.

The PSAR indicator shows price busting the dots and then being held by them as the downtrend continued.

The RSI set up a triple bearish divergence at the final high.

The MACD showed no bearish divergence with just the one bearish crossover.

1929 WEEKLY CHART

The weekly chart also shows a parabolic rise at the end of the bull trend.

The Bollinger Bands show price headed straight to the lower band before bouncing back up to the middle band and then getting crunched.

The PSAR indicator shows price busting the dots and then being held as price continued south.

The RSI showed a triple bearish divergence at the final high.

The MACD showed a bearish divergence at the final high.

Ok, now let’s move on to the most recent crash in 2008 coming off the 2007 top to see how these same indicators fared.

2007 MONTHLY CHART

We can see a parabolic rise into top which only really started around mid 2006. It is not as notable as the parabolic rise in 1929 but it is still noticeable.

The Bollinger Bands show price heading straight to the lower band before bouncing back to the middle band and then proceeding to get absolutely slaughtered.

The PSAR indicator shows price busting the dots on the downside which then held the subsequent downtrend.

The RSI showed a triple bearish divergence at the final high.

The MACD showed no bearish divergence with just the one bearish crossover the only indication.

2007 WEEKLY CHART

The weekly chart shows a parabolic rise into high. There are actually two parabolic rises as there was a deep correction before price surged again to set up a false break top.

The Bollinger Bands show price heading straight to the lower band after the final high. From there price rallied back to the middle band before succumbing to the bearish pressures.

The RSI showed a triple bearish divergence at the final high.

The MACD showed a bearish divergence at the final high.

Ok, we have some very clear similarities already identified between the 1929 and 2007 tops. Both tops show parabolic rises while both the upper and lower indicators are identical.

Now let’s look at the 1987 top which is a bit different. This crash was a bit different in that it was very quick being less than three months and looks more like a hard correction than a crash.

1987 MONTHLY CHART

We can see a parabolic rise into top. Check.

The Bollinger Bands show price heading straight to the lower band and that is where it found support and was the able to rally back to the upper band and continue on to new highs.

The PSAR indicator shows price busting the dots on the downside but then busting the dots on the upside not long after it had got back to the upper Bollinger Band. This busting of PSAR support was a fake out.

The RSI showed only a bearish divergence at the final high.

The MACD showed no bearish divergence with only the one bearish crossover before the crash.

1987 WEEKLY CHART

We can see the parabolic rise on the weekly chart.

The Bollinger Bands show price heading straight to the lower band and just getting hammered without any rally back to the middle band.

The PSAR indicator shows price busting the dots and then holding price for the duration of the downtrend.

The RSI shows only one bearish divergence.

The MACD shows no bearish divergence.

So, there are some difference between this 1987 top and the 1929 and 2008 tops.

Now let’s look at the 2015 top.

2015 MONTHLY CHART

The first thing that stands out is there is no discernible parabolic rise. Where is it? I can’t see it. It looks like a steady rise to my eye. Do I need glasses? I don’t think so.

The Bollinger Bands show price heading straight to the lower band. What does it do from here?

The PSAR indicator shows price busting the dots on the downside. Is this a fake out or will the dots now hold price as the downtrend continues?

The RSI shows a triple bearish divergence at the high.

The MACD indicator also shows a triple bearish divergence at the final high.

Hmm. Some discrepancies exist here between this chart and the other tops. Let’s have a looks at the weekly chart.

2015 WEEKLY CHART

Where is the parabolic rise?

The Bollinger Bands show price gradually moving to the lower band but not heading straight there as price did in every other chart shown so far.

The PSAR indicator shows price busting the dots after the final high but then rallying back up to bust the dots on the upside coming back down and getting smacked over the last week.

The RSI showed a quadruple bearish divergence at the top.

The MACD also showed a quadruple bearish divergence at the final high.

So, what to make of this analysis?

Well, I am looking for a serious correction but I am not a mega-bear. Not yet anyway. Having called the May 2015 top on the day after it occurred I have been bearish ever since looking for a correction of at least 30%.

However, technical analysis is about constantly reassessing the situation and sometimes expectations change with these reassessments. Certainly, seeing all the permabears reappear on TV has given me a good case of the heebie-jeebies about my expectation of an even bigger correction. No, I haven’t forgotten about the bearish 7 year cycle either but it just seems to be everyone is talking about it this time around.

There are just too many discrepancies between both the lower and upper indicators from the 2015 charts and those on the 1929 and 2007 charts. The 1987 chart is different again and seems to be in a world unto itself. The fact that the 2015 charts show more bearish divergences may be acting as a kind of fake out. Certainly, the divergences warrant a significant decline which we have already seen. But a crash? I doubt it. I am not expecting a massive stock market bust anyway and this just adds to my confidence about that.

The most troubling and obvious difference between the 2015 chart and the other charts is the lack of a parabolic rise into top. Every other crash shown has been preceded by a parabolic rise into top.

One possibility is there is a 5 point broadening top playing out with the September 2014 high point 1, the October 2014 low point 2, the May 2015 high point 3 and price currently in the process of putting in a point 4 low. Then perhaps we get a parabolic rise into a final point 5 high. The move up from the point 2 low is somewhat parabolic in nature but seems to be clutching at straws compared to the other charts.

Now I’m not saying price won’t continue heading south from here. I am just pointing out that the indications from the 2015 charts are out of whack with the 1929 and 2007 charts which are identical. These latter two charts should provide the roadmap going forward to see if we really are in the throes of a major crash.

And for the doom and gloomer’s out there, I ask again. Where is the parabolic rise?

By Austin Galt

www.thevoodooanalyst.com 

Austin Galt is The Voodoo Analyst. I have studied charts for over 20 years and am currently a private trader. Several years ago I worked as a licensed advisor with a well known Australian stock broker. While there was an abundance of fundamental analysts, there seemed to be a dearth of technical analysts. My aim here is to provide my view of technical analysis that is both intriguing and misunderstood by many. I like to refer to it as the black magic of stock market analysis.

Email - info@thevoodooanalyst.com 

My website is www.thevoodooanalyst.com 

© 2015 Copyright  The Voodoo Analyst - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Austin Galt Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules