Tags: peak bubble | anniversary | stock market | investors

Happy Peak-Bubble Anniversary!

By    |   Friday, 19 June 2015 01:42 PM

Are you one of those people who believe, as Mark Twain is once supposed to have said, that “history may not repeat, but it does rhyme”? That there’s sometimes a strange symmetry to how the world (and the markets) operate?

If you are, then there’s an odd, mathematical coincidence upon us right now. It links the top of the Great Tech Bubble in 2000, with the top of 2007’s Housing Bubble, and the all-time highs we’re seeing for the indexes here in June.

Here’s what I’m talking about: The Nasdaq Composite Index (which tracks 3000 stocks, many of them tech oriented, but also biopharma firms, small banks, and other firms a little further out on the speculative edge) peaked on March 10, 2000.

The next major peak for the Nasdaq Composite was on October 30, 2007.

The distance between those two important market dates is 2,790 calendar days, or about 93 months.

If you add another 93 months to October 2007, can you guess what month comes up next in this “cycle”?

July 2015.

Market tops are never obvious, except in the rear-view mirror. Nor do all markets, when they do decline, fall as one. For instance, the Nasdaq peaked in March 2000, but the DJIA peaked earlier, in late 1999. And the S&P 500 didn’t truly top out until the summer of 2000.

But will we look back, in coming months, at the summer of 2015 as a third historic peak in the past 15 years?

OK, now I’m going to take off my tinfoil hat. The stock market does have its “seasons” — months of the calendar year when equities historically show strength or weakness. But three data points, over 15 years, can’t be held out as evidence of anything. I can’t even really call it a “coincidence” unless the Nasdaq really does start to decline.

But there are plenty of examples of odd (and historically significant) calendar-related symmetries in the stock market to make you raise an eyebrow (or depending on your inclination, say “Oh, c’mon!”).

One of the most notable I ever came across was unearthed by former trader Christopher Carolan. He wrote a fascinating book years ago called The Spiral Calendar, and noted the uncanny up-and-down symmetry of the markets in the crash years of 1929 and 1987. And as Carolan noted, if you used a 354-day lunar calendar, the crashes (and rallies earlier in those years) all started within one day of each other, 58 years apart!

The frustrating part of dealing with this kind of information is: What do you do with it? Sell all your stocks, go to cash on your 401(k) and wait?

Still, when it comes to the proverbial “writing on the wall,” there’s plenty of graffiti — from market valuation to investor sentiment surveys — to warrant at least a mental checklist for a rapid decline in the market, even if it doesn’t happen for many months to come.

What would you sell?

Better still, what dividend stocks might you scoop up at higher yields than present?

The peak-bubble anniversary I’m pointing out here stands as just one more reminder that it pays to be careful and prepared.

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JeffYastine
Are you one of those people who believe, as Mark Twain is once supposed to have said, that "history may not repeat, but it does rhyme"? That there's sometimes a strange symmetry to how the world (and the markets) operate?
peak bubble, anniversary, stock market, investors
526
2015-42-19
Friday, 19 June 2015 01:42 PM
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