The Great Depression stock market collapse 1929-32
BUY WHEN THERE IS BLOOD IN THE STREETS!
We are not sure who coined the above phrase. Some say it was Baron Rothschild, the scion of the Rothschild banking family. What it means is that when fear is at its highest, one must toss aside the bearish feeling and turn bullish. Of course the $64 million question is, “Are we there yet?” As the market sank this past week one could be forgiven if even the most optimistic amongst us turned out to be wrong as well.
The original quote is believed to be “Buy when there is blood in the streets, even if the blood is
your own”. Well, we have suffered some bleeding. We guess the question now is, have we bled
enough or is there more to come?
In last week’s Scoop we premised that the financial panic of 2008 was more akin to the financial
panics of 1907, 1937-38 and 1973-74 than the seemingly endless liquidation of 1929-32. We also premised that the equivalent of that famous 1930-32 collapse in the Dow Jones Industrials (DJI) was the NASDAQ in 2000-02. The DJI was the cutting edge index in its time, and it fell 89 per cent. The NASDAQ fell 78 per cent.
S&P 500 STRATEGY: STAND ASIDE (for definitions of terms see end of report)
- Lows of October 10 fell as we crashed into the anniversary of the 1929 lows.
- The new low was seen at 819. We closed 6.5 per cent off of those lows.
- Gloom is pervasive as the economic numbers are relentlessly bad.
- The good news is that while we saw the lows on Thursday the market did reverse that day and put in an outside reversal. A potential key reversal day?
- We bounced off of the bottom of a longer term down channel line.
- A number of indicators have turned up and the drop this past week did not turn these indicators back down again. Included is the VIX indicator that did not make new highs
with the market’s new lows. - This sets up the potential for a number of positive divergences.
- We may have completed a five wave structure to the downside but that would only be confirmed by a breakout over 940.
- The 2002 lows are at 769 a mere 50 points below this week’s lows.
- The S&P 500 has lost 48 per cent from the October 2007 highs to this week’s low. On a close basis the market has lost 44 per cent.
- This decline has occurred in just over a year what it took two and half years to
accomplish in 2000-2002. - If we are successful in breaking out over 940 targets remain for this rally to 1050 to 1100 and possibly even to 1150.
TSX INDICES
It wasn’t a pretty week for the TSX Composite and the sub-indices. The market suffered another broad decline and a number of sub-indices made new lows. New lows were seen for Info Tech, Consumer Discretionary, Metals and Mining and Real Estate. As well the CDNX Venture Exchange reversed the previous week’s gains and also saw slight new lows.
There are some positives though as some sub indices eked out gains. Gains were seen from Consumer Staples, Telecommunications and Utilities. These are the early leaders when we are starting to come out of a deep hole. So there is some hope here amongst the gloom. Some daily indicators have turned up in a number of sub indices and thus far the pull back has not pulled these indicators back down again.
While we remain hopeful that a bottom is in the process of being made we do caution that the only ones showing any real signs of bottoming are the aforementioned Consumer Staples, Telecommunications and Utilities. But even those are now at resistance levels. [read more...]
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- Buy when there is blood in the streets! Coined by Baron Rothschild?
- The Great Depression stock market collapse 1929-32.
- A walk through the panics of 1937-38 and 1973-74.
- Comparison with the financial panic of 2007-08.
- Comparing the conditions of the 1930’s with today.
- A bottom, not the bottom.
- What could still go wrong.
- Comparison of the 1930’s markets with this decades.
- The oil crash.