LunaticTrader

Investing with the Moon

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):

2010 vs 1920s

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.

 

Danny

 

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6 Responses to “Dow Jones: high correlation with 1920s continues”

  1. John said

    Hi Danny

    Thanks for the blog, it is really interesting!

    I’m interested in purchasing your software, but I had a question – does it include all the green and red period precise dates and times? And for how many years into the future?

    Many thanks,

    John

    • Danny said

      Hi John.
      All green and red periods until the year 2100 are included. You can see exact dates and even starting times. There are also other minor lunar cycles that can become important.
      The best way to see for yourself what is in the program is by installing the free trial. The brief help file should put you on the right track. The bonus ebook that comes with the program gives more in detail info and useful strategies.

      Mail me if you have other questions.

      Danny

  2. kycal61 said

    Danny, under Performance for lunar red and green periods you use the Nasdaq. Do you have this same info for the S&P 500?

    • Danny said

      Hi,
      I don’t keep up tables for the S&P 500, because the performance page is very full already and generally there is high correlation between Nasdaq and S&P 500, so the result wouldn’t differ much over the longer term.
      It can differ from individual period to period of course, because sometimes the Nasdaq outperforms the S&P 500, or vice versa..
      For example, in the most recent lunar red period the Nasdaq lost only 2 points, so was basically flat for the period, while the S&P 500 dropped 28 points, which is down more than 1%.
      The performance page is just meant to give an objective record of how the lunar periods are doing, without using any discretion in entering and exiting earlier or later based on my subjective feeling of whether a move has further to go or not. So, for that purpose it is sufficient to use one popular index, and I have chosen the Nasdaq.

      Danny

  3. KM said

    Hi Danny, if possible can you please post an updated correlation chart?

    • Danny said

      Hi KM,

      It is getting updated from time to time. Usually every couple of months or so.
      See, my more recent blog posts.
      If you use the Search box in top right and look for “1920s” you will easily find my latest comments and updates on it.

      Danny

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