The methodology was simple. Compare a stock chart from the bear market of 1973 and 1974 with that of recent bear trends of 2008 and 2009.
The downward similarities were so striking that one would be led to believe that what happened next in the market in 1975 and 1976 would be a good prediction for what would happen in 2009 and 2010...
And what a prediction it has turned out to be. We published the chart three (3) days prior to bottom of the bear. We joked that we had no idea what would happen next and then showed the chart for the bull run of 1975 and 1976.
Since that chart was published, the graph has turned out to be the most visited page every day on The Good News Economist blog from that day back in March of 2009 until the present day!
So what did actually happen? Here you go... Look familiar?
(Click chart to enlarge)
Any guesses on what the 2011 chart might look like? (Hint: Take a peek at 1977)
(Click chart to enlarge)
Charts Source: Google Finance
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I wonder if your chart for 1977 is a good predictor for 2011 given the Euro debt crisis and the problems with our commercial real estate market. It seems like the current run up is based more on speculation tied to QE2 as opposed to improving fundamentals. Thoughts?
ReplyDeleteBill,
ReplyDeleteNot sure I understand your comment/question specific to "current run up."
This latest bull market (which started 3 days after our original post) is now up 50-60% depending on the index you follow.
It matches what happened in 1976 almost "bump for bump" for a total gain then of 60% for the DJIA.
In 1977, the markets pulled back about 15%.
As we said back in early 2009, no one knows what will happen in 2011, but the chart in this post shows you what happened the last time.
Just to be clear, the GNE blog is not here to say that the stock market will always go up. But simply, in good times and in bad, there is always a silver lining (you just might have to look harder for it sometimes.)
GNE