Emanance

For How Long Does a Dead Cat Typically Bounce?

TVC:DJI   Dow Jones Industrial Average Index
If 1929-1930 is anything to go by, about 5-6 months.

Comments

Looks quite unlikely to me. If the Dow would break through this channel downwards, the world would really be fucked. Much more likely from my point of view is something like that (and this is really already the worst case scenario correction I can imagine):
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Emanance ReallyMe
I'd probably think the same thing if I didn't know what I know about macro cycles. There are a lot of factors all on one side of the boat right now all based on the assumption of a V shaped recovery. That wouldn't be a problem if real growth across the current business cycle was representative of those expectations & sufficient to countenance those factors. But it isn't. Thus the globalisation / nationalisation cycle will continue. As you say, the world will most likely become a pretty fucked up place. But markets aren't about peoples feelings or what is right. If anything they often move in the direction of the most pain. Right now that would be a debt deflation shock not unlike 1929, except on steroids due to the dismal COVID-19 induced productivity levels & much higher than the 1930's unemployment rates. Durational comparisons to 1929-1934 aside, the argument for balance sheet expansion somehow making stocks the best safe haven to wait out the storm is a completely new concept in human history, only made possible by the so far compartmentalised nature of the corrections. But banks are perhaps the most inter reliant & inter connected of all corporate entities. Even with widespread institutional & government support I can't see Central Banks turning back the tides of history. Heck they don't even have the solid ground of a sound monetary standard beneath them this time unlike they did in 1929.
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ReallyMe Emanance
@Emanance, Pretty gloomy outlook. Who knows, we'll see... IMHO, you still have to see everything in right proportion.
Take a look at the chart during the World War II (1939-1945). That was a pretty bad time. Imagine what has to happen for the Dow to collapse the way you paint it.
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mrglobing ReallyMe
@ReallyMe, I am on the same page... And according to the next 20 years that should be it... I expect a similiar long term side way move like 2000 - 2009
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Good idea++
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Great chart, appreciate it
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I agree eventually 1-2 years out, but not soon. The stimulus has to pump first, then the fallout, then the hyperinflation due to stimulated demand and diminished supply, then collapse of dollars, and only then your scenario.
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Emanance t0annguy3n
@t0annguy3n, Unless the base assumption main street stimulus will be inflationary is wrong. It could well lead to much higher private savings & the paying down of private debt. Both highly deflationary activities. Irving Fisher's Debt Deflation Ver 2.0.
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t0annguy3n Emanance
@Emanance, And that is correct. You are correct in a sense that what you are saying is the "fallout" stage of what I said. When the stimulus was meant to stimulate the economy but instead they use it to pay down debt means stimulus did not work. Once everyone default on loans or go bankrupt as debt deflation will happen. But you forgot the FEDs and the policy side. They will reinflate to offset and eventually, this will lead to the collapse of the dollar.
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Very good I agree
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