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Strategies & Market Trends : Playing the QQQQ with Terry and friends.
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To: stock2005 who wrote (4772)5/17/2009 7:21:24 PM
From: Walkingshadow  Read Replies (1) of 4814
 
Here's the long-term chart of the Dow after the bubble that ended in 1929.

A few important points to note are:

1. From the high in Aug. 1929 to the low in 1932 the index lost almost 89% of its value.

2. The index then entered a long trading range that lasted about 20 years. That range was very wide.....about 90-95 points from top to bottom, which is about 100% using the lower rail as the denominator. Expressed differently, that is a difference of about 50% from the top rail.

3. The highs of 1929 were not seen again until almost 26 years later, in early 1955.

4. If one assumes that the buying power of the dollar declines 3% per year due to inflation (a pretty conservative estimate), then those who bought the Dow in 1929 did not break even in real buying power terms until 1987----a full 58 years later. So much for "stay the course".......

The main point I am trying to make is that once a bubble has formed, that index is dead meat for at least a quarter century, during that period, it will generally hit several bottoms, and usually the final bottom is not seen until about 15-20 years after the bubble begins to implode.

The history of bubbles shows that there are remarkably similar common characteristics. THIS is what we are looking at in QQQQ's future, now 9 years after the bubble imploded. So, I would have to conclude that history is telling us that QQQQ may not have hit bottom yet, that the post-bubble trading channel has not been defined yet, that this channel would be defined by a retest of the Sept. 2002 low (about $21), and that the highs of March 2000 will not be reached again for another 15 to 20 years or so.

Now you see why I think the Shanghai index is such a high-probability short?



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