What’s Coming is Worse Than What Happened in the Initial Crash of 1929
By AJ Monte CMT
History tells us that the Stock Market Crash of 1929 was the worst economic event in the history of the world, when on October 28th, 1929 (aka Black Monday) the market closed down 12.8 percent. The very next day, more than 16 million shares traded, and the Dow lost another 12 percent on the day known as Black Tuesday. The market eventually found support in November of ’29 and then proceeded to rally 52% over the next 6 months, topping out at 297.30 in April of 1930.
Few investors are aware of the secondary crash that took place from April 1930 to July 1932, which is when the Dow Jones Industrial Average lost 86.3 percent of its value in that 2-year period. The years leading up to this devastating collapse of the market was filled with speculation and greed, as the “Hoover bull market” attracted investors ranging from bankers and business investors to cooks and chauffeurs, who knew just enough about margin loans to be dangerous. Greed most definitely played a big role in the creation of the bubble that ultimately broke the economy…does this sound familiar?
George Santayana, the famous Spanish- American philosopher, once said… “Those who cannot remember the past are condemned to repeat it”.
My analysis of the markets tells me that the bankers, brokers, investors, and government officials have completely lost touch with the past and it looks to me that history is about to repeat itself…but WORSE.
Look at the chart below and you will see that the Dow Jones Industrial Average is following the identical footprint that led to the great crash of ‘29.
The next candle chart highlights the more recent crashes and how they compare to the crash of 1929, but more importantly, it shows how irrational the price action has gotten regarding the rate of growth displayed in the price action of the market since 2009.
In last week's article I stated that most investors are not preparing for a crash, and I talked about bearish ETFs to hedge against downside risk. My chart of the week was the bearish ETF RWM which is inversely related to the Russel 2000 Index. If you have been following along, you would have seen that my price target of 20.36 was reached.
If you are not already using candle charts as a tool for forecasting price action, I’d like to invite you to take the time to learn how to read the signals. Japanese candle charts have been around for hundreds of years, and they are now giving us signals that should not be ignored. Whether you believe the markets are about to crash, or not, they will help you establish key support levels for you to use when managing risk.
As a reminder, AJ highlights that things are about to get INTERESTING in his most recent weekly market report.
For more great trading insight/education, trade publications, & market commentary from AJ, check us out here.