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Analog Update - Dow 1929 vs. Nasdaq 2000 (UPDATED 10 Dec 2008)    

24 October 2008 - Update from Tony Kolton:

I have been using this analog as a roadmap for quite some time, advising people to "get out of all stocks" last year. The good news is that the bottom is near....perhaps in a matter of days/weeks. Then, we will claw back slowly, like we did in 1938 and 1939.

Our analog chart comparing the stock market movements from 1924 through 1938 1940 in the Dow Jones Industrial average to the movements in the Nasdaq Composite index seventy years later suggests the bears may have farther to go - perhaps another year of bearishness.

I first featured this chart in May, 2007 and wrote then:

This roadmap shows continued strength for some time yet, and as I mentioned back in February, I do not see any significant downturn until this Fall. That is the time to start to be wary, and I would even lighten up or get entirely out of the stock market by the end of August.

We featured this story again in October 12th, 2007, and in an update to that story on Friday, October 19th I wrote:

I firmly believe that the U.S. Equities market top last week on Thursday is of a long term nature and that we are about to enter a one to two year bear market in U.S. equities.

I have been closely following the zig-zags of the recent Nasdaq market compared to the Dow during the period from 1924-1937, as you can see in the chart below, and last week it appears that the ultimate top in 1937 lined up with what could be a major top for quite some time. As you can see from the charts, if history repeats, or even rhymes, we will have a rough road ahead.

See the earlier writeups listed below for more color on how this chart works.

Chart below is updated through 10 December 2008, and the historical time scale from the Dow series has been extended out two years to 1940 to provide better insight about what may lie ahead, if history continues to be a guide.

Anthony Kolton is president of Logical Information Machines and Markethistory.com, Inc.

Related Ideas:

• Update - Dow 1924-1937 Analog - March 20, 2008
• Dow-Nasdaq Analog - Updated (through end of 2007) - October 12, 2007
• Dow 1930s versus Nasdaq in the New Millennium (UPDATED Chart) - May 3, 2007

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