Ted and Bob, I decided that it would be a bit premature for me to upload the normalized excel chart because I am looking into ways to possibly profit from it and the other data I have. Go to the site that is listed below this paragraph. At this site you will find a plot very similar to what I have. The difference is that the author of the chart at this site incorrectly plotted the 1997 DJIA on it (he picked the wrong start date). However, the 1929 and 1987 normalized lines are exactly correct as I have them on my chart. Notice how both the 29 and 87 lines are extremely similar in the days preceding the crash and also as the crash is ensuing.
nxn.netgate.net
Also very significant from the chart is the level that the 1929 and 1987 prices reach in their struggle to break to new highs. You can see this for 1929 on about the 23rd trading day and for 1987 on the 28th or 29th trading day from the all time high. In both cases, the averages could not break through this level (the resistance level has a value that is equal to a 3% decline from the all time highs in 29 and 87). So, as I mentioned in my first post, this would equal a value in the current DJIA of approx. 8011. If the DJIA breaks through this level significantly, then I would have to start doubting the 1997 crash scenario. But it does not mean that the crash cannot still happen. Remember Mark Twain said history doesn't repeat itself exactly but it rhymes.
Ted as far as historical data goes, I think your best bet is to get it from www.prophetdata.com/stocks.html or by buying Metastock 6.0 for Windows95 which includes data on the DJIA back to 1900. I think a new updated version of Metastock will be ready in about a week or so. I highly recommend it. It has helped me a lot in putting all these stocks prices into their proper perspective. But I warn you both CD's aren't cheap. They both run for about $300.00
Bob, in response to your earlier post, "Tek, posted on the Kahuna thread that the last time the market went up 3% in one day was 8 days before the 87 crash, which would put this crash at 9/10/97 - Thoughts ? " --- I agree with that statement except it depends on what you consider to be the start of the crash. The eighth day after that 3% up move in 1987 was the last and final peak before prices started heading south. But the day at which prices dropped 23% in one day was of course the infamous October 19, 1987. But from a practical trading perspective, I would have to agree that eight days or sooner from the 3.37% 1997 September 2nd one day rally would be the optimum time to enter put options (This date is actually September 12th, 1997 - not September 10th).
But you have to admit, it is truly amazing that the percentage difference between the one day 87 and 97 rally is only .37% ! AND that they have both occurred in the same month. But this is not the end of the story. Take a look at the price chart for the periods (May, 1987 - September 1987) and (May, 1997 - September 1997). Once you have these two price charts in front of you side by side, you will notice that there are 7 identifiable `legs' which are very similar in duration, percentage change AND seasonality. So far I have identified 7 distinctive legs which are frightfully similar. We are now in the 8th up leg, analogous to the 87 up leg to the final peak. If the DJIA completes this 8th leg and fails to break through past histories suggested resistance (approx. 8011 level), all I can say is LOOK OUT BELOW! That would then be the 9th and final leg of total panic.
Now a few anecdotes:
I want to address this so called `liquidity and baby boomer argument' which says that this group is funding the current bull market and will continue to do so which will keep it sustainable.
In the August 9th Economist "Lovely while it lasts" the authors argue that America's bull market is due for collapse. A reader responded in the next weeks issue arguing the claims that were made in the Economist. I quote him, "In the end, as you say, two things really do determine the price of a share: the amount that a buyer is willing to pay, and the amount that a seller is willing to accept. The various pricing models are ways to guide the buyers and seller's opinions. Models aside, as long as Americans have the confidence to pour money into mutual funds, fund managers will pour money into markets, pushing up share prices indefinitely". I disagree with this statement! If everyone wants to sell, don't tell me you are going to be able to get yesterdays price! I don't care how liquid the market is.
Ralph Acampora (pardon possible spelling error) also cites the baby boomers funding this bull market as well as countless others (economists, fund managers) on CNBC and the mainstream press. By now this has almost become a new clich‚ of this decade! But in the 1929 year end New York Times Financial summary where the authors reflect on the market crash that occurred a few months earlier, they say, (Begin quote) "The demand for the facilities of the stock exchanges of the country spread to every city, town and almost every hamlet until "the country" was in the stock market". (End of quote)
Now imagine, even as far back as 1929 the feeling was that `everyone' was in the stock market! And here we are decades later saying the same thing! (And using it again as an explanation for indefinitely rising share prices). Like the web link in the opening article that introduces this thread says, people become victim to `cognitive dissonance' which blinds them from the present day reality.
I can't resist another quote from the year end New York Times Financial summary of 1929. (Begin quote) "In one respect the history of 1929 resembles that of 1920. The two years differ, in that the panicky collapse of nine years ago came in immediate sequence to inflation of commodity values, whereas last Autumn's break-down followed inflation of values only on the stock exchange. Otherwise the analogy is close. The preceding speculation had on both occasions been built up on the basis of pure illusion; in each year the whole country seemed to be deluded into the notion that a new economic era had arrived, in which all old fashioned economic axioms might safely be disregarded. In both 1929 and 1920 prices had been carried to previously unimagined heights. In both, it was insisted up to the last (even by serious businessmen) that they were destined to go vastly higher." (End of quote)
Most people feel a strong urge to join the crowd and to "act like everybody else". Imagine how much fortitude it takes to stand alone and independent from everyone else with a clear mind and say today that we are on the brink of a major correction. It is probably one of the hardest things to do in the world!
Abbey Joseph Cohen in the weeks or week before the 1987 crash projected prices would be higher. And just a few days ago on CNBC, Abbey Joseph Cohen again stated the same thing for the current 1997 market. What a great contrary indicator!
I really recommend going to the library and scrolling through the 1929 New York Times or the 1987 New York Times as I did. It really helps to put all this into proper perspective.
One last and final quote from NYT, Monday December 30, 1929.
(Begin quote) "The year that ends tomorrow is regarded now, and will be considered in all future financial reminiscence , with very much mingled feelings. Even the nation-wide speculating public , which has taken its losses and , at least in outward semblance, learned its lesson, will hardly end the year without some sense of bewilderment. Barring the Wall Street money rates, everything seemed to be going well up to the middle of September. Stocks should go higher when business prosperity increases in a striking way, and trade activity, even in the usually dull midsummer months, had reached a magnitude never witnessed in that season. If prices for industrial products were not rising, profits were. Few disturbing incidents had occurred in company finance, to suggest that the upward trend of earnings and dividends would not continue indefinitely. Yet this was the very moment selected by fate for a crash in Stock Exchange values quite unprecedented in history" (End of quote).
Take a close look at the current price chart of 1997 and remember behind each and every tick mark are millions of people with emotions of greed and fear. And remember also that every crowd has a leader; in the case of the stock market, the DJIA price has been the crowd's leader. But now that the DJIA is losing its direction, (as discussed above in similarities to 1987 price movement) the crowd is beginning to lose its faith in the leader. Any crowd that loses its leader will panic. This beast known as the DJIA is alive and it has the same pulse now that it did in 1987 and 1929.
Regards,
Thomas Carreno
September 5th, 1997 |
