And by looks, I mean looks.
Look at the two charts below. Perhaps you’ll see the same thing I do.
Click on the charts to make them bigger.
$SPY Daily:
$SPY Weekly:
What I notice is that the amount of time between the bottoms and tops has been getting shorter and shorter.
If this pattern continues, we could be looking at an intermediate term top in the very near future.
Wood, have you ever read Sornette? He is a physicist, I believe, that noticed similar patterns to the one you just described often precede crashes. A lot of the math is beyond me, but the overall thrust of his argument is pretty clear. Guess I will have to dig out his old papers and books.
Tough typing on my tablet, so here is a bit more. Sornette believes the pattern you show above, which he calls log-periodic, is an indication of increasing herding or positive feedback among investors; i.e., momentum dominating the buying and selling. At some point the market enters an unstable region, and is vulnerable to a cascade of selling, causing a crash. There really isn’t a specific trigger that causes the crash, it’s just random. Of course, these instabilities happen every few years, and generally just die out rather than resulting in a crash.
Very cool. Thanks for posting this Bozo. Off to do some google sleuthing on Sornette!
My thoughts exactly. Searching for Sornette and crashes led to a dozen papers, mostly at arxiv.org (so they’re generally free). Hadn’t heard about any of this since 2000, but apparently it’s still being studied. A quick read looks like maybe 1/3 to 1/2 of these patterns have some kind of crash as the end result, but crash usually doesn’t mean a huge drop. People stay invested despite the risk because of the large profits to be made.
My compliments on your perceptiveness and powers of observation in spotting the pattern. I completely missed it.
defense stocks, major 4 day pounding.
Tell me about it – my wife and I are both ex-defense contractor employees with 401k’s still there. Company stock (which we hold due to NUA) is probably less than 20% but still painful. I really feel for our old co-workers who are wondering when the axe is going to fall.