[shady28]

[shakespear1]

Now you got me scared

[backstop]

Shady -

can you test what is the best fit correlation on those two data-sets ?

What is still odder is that the '87 Crash was directly triggered by the Great Storm that hit the UK. Which was itself at least a 250 year event.

The media never touched the linkage, though the city brokers were painfully well aware of it.

Will relate the story if anyone's not up on it.

Regards (somewhat puzzled)

Backstop

[Doly]

I'm not personally impressed by the relationship. 87 was clearly prices going up in a bubble. What you see now isn't really going up.

[shady28]

$this->bbcode_second_pass_quote('Doly', 'I')'m not personally impressed by the relationship. 87 was clearly prices going up in a bubble. What you see now isn't really going up.

[killJOY]

Seems more like seeing Jesus' face in a tortilla.

[aahala]

The chart makes the two years look very similiar and that was undoubtedly
the intention of its creator. But the chart was not drawn fairly.

The left and right hand vertical guides are not fixed in the same
proportion. If 1987 were drawn in proportion to the 2005 one year would
look a lot flatter than the other.

The trend lines are not consistently drawn between the two years. Notice
the first up and down for each year. Why were the tops used for one year
and the bottoms for another? And they weren't even consistent within the
years. If you gave a chart of one of the years to 10 people to drawn the
trend lines, you would get 10 different results.

[anthem]

You beat me to it aahala. The chart is not accurate at all. Even with the difference in scales on the Y-axes, if the "trend lines" were taken away, 2005 line would look much more flat. Clearly the data was fitted to the presupposed conclusion.

[JustinFrankl]

$this->bbcode_second_pass_quote('killJOY', 'S')eems more like seeing Jesus' face in a tortilla.

[shady28]

You're correct in that one pattern is more compressed vertically than the other. Bravo on critical thinking skills.

Unfortunately, the patterns can be squashed or stretched in time without affecting their validity - at least according to elliott wave theory.

This pattern on the market is one that has a lot of analysts befuddled. It's a real 'conundrum'. The thing that is scary about the market at this moment is that they are likely going to do one of two things - and very very soon. Crash or break out to much higher levels.

If you have the time to research it, check out the parallels between the DJW index (DJ world index) in late 1999 / early 2000 and compare to the last year in the Dow Industrials. That pattern is much more enlightening. The pattern also occurs at the top of the S&P500 in 2000. All 3 patterns, while not exact matches, have valleys and peaks in the same places. What are the odds that those 3 major tops would have such similar patterns? What are the odds we would trace out a similar patter now?

Just food for thought. There is nothing definitive in this and yes, if you look hard enough, you can see patterns everywhere.

[CARVER]

I don't buy this idea of a coming stock market crash, it totally goes against all the other news we have been reading, like: huge deficits, high inflation without economic growth, jobs disappearing in almost every sector, etc.

I'm keeping my finger on the trigger.

[RdSnt]

I'm not too concerned about the scale differences, however one factor that isn't mentioned is the prevalence and increasing aggressivness of the Plunge Protection Team. They weren't in place in '87.
I would expect their interference in the market will delay the timing of a crash but at the expense of increasing the pressure which will exaggerate the force of the inevitable crash.

[bobbyboy]

I'm skeptical, one because of this:

Failed crash prediction, May 2004

Two because of this:

Move over, Adam Smith: The Visible Hand of Uncle Sam

[knightrd]

The two graphs aren't nearly as alike as those "vectors" would make it seem. The 1987 data shows more of an upward trend, whereas the current data is more flat on average.

However, I think we face some serious issues: energy costs, inflation, flat wages, a big housing bubble, and continued war. Therefore I do believe we are in for a recession or worse.

[erl]

Personally, I think the "face" in the tortilla looks like Africa.

Or, maybe South America.

Or, maybe Mohammed Atta.

[cheRand]

Or M.C. Escher. I think the DJ graph looks like an Escher design. Do you think I should invest in lyposuction as an alternative fuel?

[MicroHydro]

I had already purchased put options on the DJIA index with expirations in January 2006 and March 2006, so obviously I believe there is a chance of a DOW decline. But, the technical analysis above is meaningless nonsense.

[oilluber]

$this->bbcode_second_pass_quote('MicroHydro', 'I') had already purchased put options on the DJIA index with expirations in January 2006 and March 2006, so obviously I believe there is a chance of a DOW decline. But, the technical analysis above is meaningless nonsense.

[cheRand]

What about Spydrs (sp?)... an Industry-specific index fund in oil?

Motley Fool cautions that you better know the industry. That's all I know about them.

[JimBad05]

IMO that information is meaningless. One could sit there and analyze graphs forever, but to no avail. Correlation and causation are different. Are the peaks and valleys corresponding? (correlation) yes. Are the massive drops caused by the same cause? No.

It's the same principle as a rain dance. Suppose that someone does a rain dance on Monday and Tuesday. It rains both days. So, the weather and rain dance data correlate. But, at some point this correlation will cease. At some point the rain dance will be preformed and it will not rain. This is because there is no causation - the rain dance does not cause it to rain.

So, if you like you can read in to correlations all you want. I think that causes (in the stock market: disasters price spikes, etc.) hold 100x more weight than correlations.