Tuesday, July 6, 2010

The Bubble Composite

"As Mark Twain said, 'history does not repeat itself, but it does rhyme' There is a certain rhythm to secular bear markets in that they often take a similar shape in magnitude and duration. Secular bear markets can last anywhere from 10-15 years and I have created a bubble composite based on three well known bubbles and secular bull market tops. The bubbles I used were the Dow Jones from the 1929 peak (Great Depression), gold’s 1980 top (beginning of The Great Moderation), and the Nikkei’s 1989 top (Japan’s Lost Decade). Taking the average path of the three bubbles and overlaying the data with the NASDAQ’s 2000 market top showed that there was a likelihood that 2010 would contain the next major market peak and that we would then have a long slide into the next low in 2013. The bubble composite has been uncannily accurate and projected a market peak in the first half of 2010 followed by a short snap back rally before plunging back to the 2009 lows. Given the bubble composite is an average of three paths the day to day noise is a bit filtered out though the declining trend for the next few years is as clear as day and is not the least bit encouraging."
Chris Pupluva

A very intriguing analysis:

My intrigue with fractals is well known.

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