Market Crash this year?

2014 to be Another 1929? 

Signs Point to a Stock market Crash

Written on Friday, February 28, 2014 by Susan Horton

The Dow sank from 400 to 145 on October 24, 1929. In only three days over $5 Billion dollars’ worth of capitalization had been erased and by the end of 1929 a staggering $16 Billion had been lost from the NYSE stocks. This crash caused the Great Depression that lasted from 1929 to 1955 a full 26 years later. Wikipedia: 1929 Wall street crash.

Today we are hearing echoes from analysts and economists warning that we maybe on that same path. There is a scary chart circulating on Wall Street that is now getting plenty of attention.

“There are eerie parallels between the stock market’s recent behavior and how it behaved right
before the 1929 crash. That at least is the conclusion reached by a frightening chart that has been making the rounds on Wall Street,” Says Mark Hulbert from Market Watch, Wall Street Journal

.

If his name sounds familiar it’s because he is the man, editor of Hubert Financial Digest, who warned us of the 2008 crash.

The chart superimposes the market’s recent performance on top of a plot of its gyrations in 1928 and 1929. “The picture isn’t pretty. It’s not as easy as you might think to wiggle out from underneath the bearish significance of this chart.” I should know Hubert states, “I quoted a number of this chart’s skeptics in a column I wrote in December.”

“The market over the past two months has continued to more or less closely follow the 1928-1929 pattern outlined in that two-months-ago chart. If this correlation continues, the market faces a particularly rough period later this month and in early March.”

Money News Source says, “Warning, stocks will collapse by 50% in 2014.”

You may be inclined to dismiss this like many others that were laughing back in November when this chart just began to circulate. Four months later after seeing the chart’s progress, there is not so many  people laughing now.

There is an uncanny and scary parallel shown and depicted on a chart courtesy of Tom McClellan of the McClellan Market Report. He in turn gives credit to Tom Demark, a noted technical analyst who is the founder and CEO of Demark Analytics and was the one who drew up the parallels to begin with.

One of the biggest objections heard two months ago from skeptics was that the chart is a shameless exercise in after-the-fact retrofitting of the recent data to some past price pattern.  Hubert notes, “That objection has lost much of its force.”

Another objection was that there are entirely different scales on the left and right axes of the chart. The scale on the right, corresponding to the Dow’s (DJI: DJIA) movement in 1928 and 1929, extends from below 200 to more than 400-an increase of more than 100%. The left axis, in contrast, represents a percentage increase of less than 50%.

Hubert says, “There is less to this objection than you might think. You can still have a high correlation coefficient between two data series even when their gyrations are of different magnitudes.

The chart was first publicized in late November of last year, and the correlation since then certainly appears to be just as close as it was before.

To be sure, as McClellan acknowledged: “Every pattern analog I have ever studied breaks correlation eventually, and often at the point when I am most counting on it to continue working. So there is no guarantee that the market has to continue following through with every step of the 1929 pattern. Yet between now and May 2014, there is plenty of reason for caution.”

America’s Stock market crash of 1929 was a powerful market crash that started in October 1929 after the roaring twenties economic “bubble boom” finally popped. America experienced an era of great prosperity and peace during the twenties. After World War 1 the economic and cultural boom was fueled by industrialization and popularization of new technologies. The radio and the automobile became popular as well as air flight becoming more common.

The Dow stock average soared, comforted by the fact that stocks were thought to be extremely safe by most economists due to the powerful boom.

On October 24, 1929, a spate of panic selling occurred as investors began to realize that the boom was actually an Over –Inflated speculative bubble. Margin investors were decimated as large numbers of stock investors tried to liquidate their shares to no avail. Millionaire margin investors went bankrupt almost instantly when the Stock Market crashed on Oct 28 and 29, 1929. Wikipedia, source

Tom Demark added in an interview that he first drew up the parallels with the 1928-1929 period well before last November. “Originally, I drew it for entertainment purposes only, he said-but no longer. Now it’s evolved into something more serious.”

If today’s Market follows the same script, trouble lies directly ahead. His chart started at July 2, 2012 and runs through April 2, 2014.

Bloomberg headlines February 5, 2014, Markets 19th Breakdown sees Bulls unmoved as Trillions lost. It was just a few weeks ago and it was Three Trillion Dollars the people lost.

One of the market gurus responsible for widely publicizing this chart is hedge-fund manager Doug Kass, of Sea breeze Partners and CNBC fame. In an e-mail in past weeks Kass wrote of the parallels with 1928-1929: “While investment history doesn’t necessarily repeat itself, it does rhyme.” Based on a number of indications rather than just this chart drawing of the 1928-1929 parallel, he believes that “the correction might have just started,” he said.

Demark is even more outspokenly bearish. “If the S&P 500 (SNC: SPX) decisively breaks the 1,762 level, then a major bear market will have only just begun.”

Rev 6:5 …”Come and see.” So I looked, and behold, a black horse, and he who sat on it had a pair of scales in his hand.

6-6…And I heard a voice in the midst of the four beasts say, “a Quart of wheat for a day’s wages and three measures of barley for a denarius, but do not hurt the oil and the wine.”

I suggest we prepare our hearts America. We cannot avoid an imminent crash. Having three (QE’s), Quantitative Easing’s, with the Treasury Dept. printing more money, putting us in ever deeper debt, $17 trillion plus without substantial spending cuts to offset it puts us on the 1929 crash chart.

Obama just received a blank check from Congress for spending and he controls the “Scales” now. His words, “electricity will necessarily skyrocket” when he goes green. California which is a huge source of our food has been dried up because of the EPA protecting a smelt…minnow. This will only cause further inflation which will eventually cause a stock market crash. This chart is right on target for this Administration’s goal. Only question I have, is it going to happen in 2014?