Here is the current chart from 2008 to 2010 of the S&P 500:
Here is the chart from 1929 to 1930 of the Dow Jones Industrial Average (DJIA)
On each chart, there are labels. A label on one chart, should correspond (similarity) with the same label on the other chart.
A: 2007: S&P 500 peak of around 1560
A: Sept 1929: Dow Jones Average peak of around 380
- B:2008: S&P 500 Drops from 1560 to 1270, -18% drop.
B:1929: Dow Jones Average Drops from 380 to 325, -14% drop.
- C:2008: S&P 500 Intermediate Peak from 1270 to 1440, +13%.
C:1929: DJIA Intermediate Peak from 325 to 352, +8%.
- D:2008: S&P 500 Crashes in short time period.
D:1929: Dow Jones Average Crashes in short time period.
- E:2008: S&P hits intermediate bottom of 741, a drop of 52% from peak of 1560.
E:1929: Dow Jones Average hits intermediate bottom of 230, a drop of 39% from peak of 380.
- F: 2008: S&P 500 Sharp Rebound from 741 to 944, a gain of 27%.
F: 1929: Dow Jones Average Rebound from 230 to 271, a gain of 18%.
- G: 2009: S&P 500 hits Bottom from 1560 to 666, a loss of 57.3%
G: 1929: Dow Jones Average hits bottom from 380 to 198, a loss of 48%
- H: 2009: S&P 500 Rebounds from bottom.
H: 1929: Dow Jones Industrial Average Rebounds from Bottom.
- I: 2009: S&P 500 Pulls back from Rebound.
I: 1929: DJIA Pulls back from Rebound
- J: 2010: S&P 500 Hits "Left Shoulder"
J: 1930: DJIA Hits "Left Shoulder"
- K: 2010: S&P 500 Hits "Head"
K: 1930: DJIA Hits "Head"
- L: 2010: S&P 500 Hits "Right Shoulder"
L: 1930: DJIA Hits "Right Shoulder"
- M: 2010: S&P 500 Hits "Rare Double Right Shoulder"
M: 1930: DJIA Hits "Rare Double Right Shoulder"
Rare Double Right Shoulder 2010, and in 1930 Before More Drops
Another similarity involves a rare technical pattern, the Head and Shoulders Top with a Double Right Shoulder.
Two other writers including one from China Daily, and the other from CNBC have written about this.
2010: Double Right Shoulder in Head and Shoulder Pattern
1930: Double Right Shoulder in Head and Shoulder Pattern
Big and Long Drop Ahead?
If the Pattern holds, are we in for a Big and Long Drop Ahead?
In 1930, after the rare Double Right Shoulder in a Head and Shoulders Technical Pattern, the Dow Jones Industrial Average Continues to fall from 275 in 1930 to around 41, July 1932, a drop of 85%.
Of course, just because the charts are similar in both eras does not necessarily mean we will repeat history.
But it does make us think.
Today's S&P 500 Chart