Apparently the cool thing to do nowadays is to overlay a chart of the S&P 500 with crude oil, bonds, silver, the Euro, the price history from 1929-1938, percentage of debt to GDP, dash it with olive oil and balsamic vinegar, and enjoy it whilst sipping chilled white wine. While this type of analysis may serve as fodder for super dorks eager to impress girls at the locally owned bookstore, the market has a funny way of rendering this type of analysis not only incomplete at best, but worse damaging to your account balance.
Markt Twain once remarked that, “*(h)istory does not repeat itself, but it does rhyme.” When trying to outsmart Mr. Market with history, it would be wise to keep that quote in mind. Of course, I do not mean to trash the idea of studying market history. Quite the opposite, in fact. I am constantly looking at prior periods of the market. However, I am doing so with a clear emphasis on the “rhyming” portion of Twain’s aphorism, as opposed to the “repeating” part. The point is that there are no clear shortcuts in the market. Placing current price action in the backseat behind an historical chart overlay is a recipe to stubbornly fight the tape for an extended period of time, which as you know can and often does lead to disaster.
While rigorously studying the history of the market is necessary for success, it is far from sufficient in terms of formulating an actionable thesis relevant to the current market. Hence, resist the urge to become a super dork.Twitter