There should not be too much dispute that analogs or fractals of the past play out in the future. They are evident all the time, often on the same market chart using different time frames. The greatest "proof" of this would involve 1987. Paul Tudor Jones used an analog of 1929 to be properly positioned for the 87 crash. He made a small but understandable mistake in thinking the aftermath would be the same also; which is the other characteristic of fractals/ analogs... they don't last forever.
interesting charts. The solution here is obvious. Stay long; keep some cash on the side; and buy some far OTM october puts with low volatilities (or seps first). perfect puts to buy are companies like XOM, GOOG, etc. that have super low volatilities and DO move huge when black swan events hit. likely nothing happens and your puts lose. Just remember one thing. If you bought after the stock market crash of 87, you did very well. The perfect dip to buy. Lesson: keep cash ready to buy that dip.
Found this commentary, thought I'd throw out to the history buffs. credit to fog1937. Here is what happened in 1987: Starting in 1981 and by 1986 the Paul Volker's Fed had reduced the Carter Inflation of approx 15% to less than 4%. In 1982 the Stock Market sensed Volker would succeed and began to rally, a Rally that carried into 1987. Volker (wife's health) wanted to get back to NYC and wanted to make 'real Money', he announced his resignation in 1986. At the hight of the political strain between President Reagan and a Democrat House/Senate, Democrats made it plain that the only acceptable replacement would be the 'RINO' Greenspan. Once appointed, Greenspan wanted to demonstrate how tough and independant he was from the Reagan administration, he began tightening Money and increased short term interest rates. Maybe he wanted to ingratiate himself to the Liberals, but he clearly felt it was his job to remove the 'punchbowl' from the Stock Market and he wanted to counter act the ecconomic benefits from the Reagan Tax cuts (something dear to the hearts of the Demograts). This tightening of Interest Rates/ Money Supply chocked off the Stock Market momentum until the dramatic collapse of October of 1987 was the classical breaking point of Greenspan's irresponsible actions. The Monday after the crash, Greenspan flodded the Markets with liquidity, waived margin requirements for institutions (but not for individual investors), allowed Brokerage houses to walk away from adverse trades with individuals and was subsequently hailed as the savior of the financial system. Since he clearly hurt the Reagan administration in hurting the USA economic system, he became an instant hero to demograts, when he really should have been fired (at that time Reagan no longer had the guts to act resolutely). With this background in mind, simply looking at charts to compare the current scenario to 1987 is about as wrong as one could be.
nice of you to manipulate the scales to make both charts look similar when in fact they're not. another useless chart.
In 1987 the Dow was up almost 40% by the summer highs. This year it was up what, 15%? No comparison IMO.