Dow Jones: high correlation with 1920s continues
Posted by Danny on August 21, 2013
This is a follow up article on a topic I addressed in early June, see: What parabolic peak?
The Dow Jones has kept climbing to new record highs, and this is how the comparison with the post-depression bull market in the 1920s has evolved (click for larger image):
The correlation has actually increased to 0.84 (it was 0.81 until last June), so it remains very high.
We are now right at the point where the market made a peak and then declined over 12% in just two months.
If the same scenario unfolds again, then the Dow should drop below 14000 by the end of September.
Back in the 1920s, that drop marked the start of a period of sideways movement that lasted for about a year.
Let’s see if history continues to repeat.