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To: AllansAlias who wrote (82016)	3/18/2001 2:37:09 AM
From: Perspective	Read Replies (1) \| Respond to of 436258

Allan, Have you spent much time comparing the '29 Dow to our present Naz? The similarities are eerie. Unbelievably spooky. I think I mentioned a couple of months ago that our move to new lows after the surprise rate cut was a stunning departure from the Nikkei experience, which began to tilt the odds in favor of something worse than Japan 1990-2. Our Nasdaq's rate of descent is higher than either Nikkei or Dow 1929. The most intriguing thing for a chart hugger like myself is the corrective wave structure. There was the lone four-month upward "B" at the end of 1929 followed by a pause at the original 1929 low, which we acted out on almost the exact same timeframe. Following the break of the 1929 low, there were only four rallies of any substance, none of which lasted more than about six weeks, and none of which ever seriously challenged the prior low from beneath. If you lock January 1931 to January 2001, you see the first of the four rallies in sync, but our timeframe is clearly compressed by about 1/3. Other items of interest: we appear to have broken the lower line of the declining channel earlier than the Dow 1929; it took until late 1931 for the break to happen back then. Man, was that slide ever brutal. The best one could do was go short and stay short. Lighten up a little whenever one of the three-month downleg resistance lines was broken to the upside, but look to set the position again into strength. It wasn't time to really go bigtime long until the 1929-33 downtrend line was broken, although a trader applying reasonable stops would have avoided most of the shelling due to the late 1932 bounce. I may come to regret this decision, but I think I'm going to read off the 1929 play sheet going forward, and let the market prove otherwise. Thanks for the great charts - you're a tremendous help! BC

To: AllansAlias who wrote (82016)	3/18/2001 9:34:56 AM
From: Ilaine	Read Replies (2) \| Respond to of 436258

Allan, that's a very helpful chart. What software did you use? I assume that the computer put the red and green dots on the chart, you didn't have to do it by hand. I know the Dow average is useful as a proxy for the entire market, but the thing that bothers me about using the Dow average is that it's just a proxy. Charles Dow was a financial journalist who started publishing his average in 1884 in the Customer's Afternoon Newsletter, which was the precursor to the Wall Street Journal. The companies in the Dow average were switched around quite a bit during the early years, much more than they are now. In Jeremy Siegel's "Stocks for the Long Run," he says he used the following sources: William Schwert, "Indexes of United States Stock Prices from 1802 to 1987," Journal of Business, 63 (1990) pp. 339-426; Cowles indexes as reprinted in Robert Schiller's "Market Volatility", MIT Press 1989; and the Center for the Research in Stock Prices (CRSP). Cowles indexes are capitalization-weighted indexes of all New York Stock Exchange stocks and included dividends. The CRSP indexes are capitalization weighted indexes of all New York stocks and starting in 1962, American and NASDAQ stocks. I don't know what data is available online or whether it's free, but I think it would be more meaningful to compare rate cuts with the entire market, not just the Dow index. To me what would be REALLY interesting would be to see whether the cuts reflected the real interest rate. I have been reading that in the 1920's, deflation was happening so fast that even when the fed cut nominal interest rates they were still above the real interest rate. I don't know how they calculate real interest rates, though.