Back To The Big Picture

The markets continued to struggle yesterday but managed a turnaround in the last hour from another sharp sell off. The effect on our Trend Tracking Indexes was negligible.

Every so often, I like to look at the big picture as to where we are in relation to other historical bear markets. The best graph on that subject is compiled by Doug Short, and I have referred to it in the past several times.

Take a look:

[Click chart to enlarge]

A picture is worth a thousand words and this one is no exception. It is interesting to me that the current market drop from 2007 (blue line) most closely resembles or tracks the crash of 1929 (gray line).

Sure, nothing is certain, and there is no way to accurately forecast if the current trend will end up like the 1929 scenario. My point is that a directional change can happen either way at anytime; it simply pays for you to be prepared so you don’t end up wandering around in astonishment should the bottom drop out again.

Any investor not preparing himself via some kind of exit strategy may be doomed to pay a high price for ignorance—again.

About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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