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Thursday, February 26, 2009

Quick and dirty analysis

I was talking to someone today, and one thing I am realizing is that people do not understand the severity of the decline/correction we are going through. It is easy to look at the Dow chart I posted a dozen times over the past six months and say "well, we are back at 2002/2003 lows". True, but to put it in perspective:

1.) It took almost five years for price to move from the low-7,000 range to the high of 14,198 (October, 2007).
2.) Ten months ago we were above 13,000.
3.) Seven months ago we were above 11,000.
4.) Four months ago we were above 10,000.

When considering the low-7,000s referenced in #1, it is important to note that those levels were the result of a three year decline that occurred after price reached the previous high of 11,750 (January, 2000). So the last major decline/correction after a new high took three years. The bulk of this decline/correction has taken less than a year; less than a year to wipe out 100% of the gains that took almost five years to achieve.

So yes, we are back to 2002/2003 lows.

edit - I just heard on CNBC that if the markets averaged a 7% return per year, it would take until 2020 to get back to the old high. That puts things in perspective.


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9 comments:

Brent said...

It has been violent to say the least. Great blog, thanks for sharing.

Doug K. said...

X, the "push through" setup works on the 15 minute charts too. I know you don't trade that timeframe, but STT was a great setup and my target was the fibonacci extension of yesterday's low to the high of the first 30 minutes. Entry was a break of the 2nd bar.

Your blog has really made a difference in my trading. Keep it up please!

Taco Tico said...

The blood continues to flow...

Complacent Panda said...

Thanks for posting this comparison X. It needed to be said. And people will probably need it repeated...

Michael said...

your right, i didn't realize how quick it happened.

armo70 said...

X,

I echo what Doug K said, your blog has made a huge difference to my trading style - thanks for sharing. I got three great trades today (Thur) all as a direct result from putting in long hours studying charts and the single most important aspect I have taken from your site is to focus and not jump from method to method. I feel my trading has turned a corner.

(all 10 min charts)check out MON - an entry of a break of the 3rd bars high an "in the tail" set up. I got a similar (but riskier entry) on AFL break of 2nd bars high, and my favourite was a short on BA - gapped up initially but quickly fell through the floor then it pulled back to the 50% retracement line and then moved back to and broke the ORL. I went short on a break of the 7th bars low.

your site rocks!

Trader-X said...

Thanks for the kind words all. armo - I traded MON as well.

Chad said...

I like your insightful points X.

I think something to keep in mind is we are coming off of a massive BUBBLE. Prices were artificially inflated because of profits that never should have been made in the first place. Had it not been for those practices, the market may have even dropped a bit further before it started to rise. So now the bubble is punctured, the market will return to a natural level -- below a natural level, in fact, because of all the foolish practices that pumped it up.

It reminds me of Rome.

ron said...

thanks for your blog, it is extremely informative and I look forward to many more reads..i heard the same thing on cnbc yesterday, the 2020 thing. people have been sold a bill of goods....the past does not always repeat itself....someone said something somewhere about using history to help advance one's aganda...people need to be very careful these days....fools and their money can soon be parted. warren buffet unbcluded....keep on keepin on and thank you, X