General Topics
Markets
Technical Topics
Brokerage Firms
Company Specific
Community Lounge
Site Support

Dow 1932 - 1937 vs. COMPX 2002 - 2007

Discussion in 'Technical Analysis' started by gharghur2, Sep 21, 2005.

1. gharghur2

There is a striking correlation ongoing between the progression of the current bull market in the COMPX and the bull market in the INDU from 1932 - 1937. Both, mind you, initiated from super cycle lows: the INDU crash 1929 - 1932 and the COMPX crash 2000 - 2002.

Wave 1: INDU lasted 2 months, COMPX took 1 month.

Wave 2: INDU lasted 5 months, COMPX took 4 months.

Wave 2: INDU corrected a steep 77%, COMPX was also steep 67%

Waves 3 and 4: INDU took 17 months, COMPX took also 17 months.

Wave 4: INDU corrected a moderate 39%, COMPX was also moderate 46%

INDU spent 9 months in a trading range before breaking out, COMPX thus far 12 months.

Wave 5: INDU advanced 158% of Waves 1 - 3 (108 vs 68 pts), COMPX Waves 1 - 3 (1040 pts)

The entire cycle 1 bull market: INDU 5 years, COMPX thus far 3 years.

refer to the link below for conclusion.

http://spaces.msn.com/members/caldaroEW/

A correlation is something related to a statistical fact whatever on a large number of observations or a large number of time steps. What you see is called a coincidence.

3. gharghur2

Simple Linear Correlation (Pearson r). Pearson correlation (hereafter called correlation), assumes that the two variables are measured on at least interval scales (see Elementary Concepts), and it determines the extent to which values of the two variables are "proportional" to each other.

http://www.statsoft.com/textbook/stbasic.html#Correlations

Correlation :

corr = (E[X*Y]-E[X]*E[Y])/sqrt(Var(X)*Var(Y))

Where E[.] stands for 'expectation of the random variable' and Var[.] stands for 'Variance of the random variable'.

Then just take daily data for the DOW between 32 and 35, COMP data for 02-05 and compute their correlation.

If an index is going up 50% on a 3 months period and another is going down 50% on the same period, what is their correlation ? And please don't come and say : '-1'...

5. gharghur2

If one is to believe that the stock market abides by the "random walk theory" then coincidence would be the appropriate word. Also, to attempt to make a day by day comparison between two indices, separated by 70 years, with vastly different political, social and economic issues might be an exercise in futility. But then again, it may all fit perfectly.

However: both indices are indeed reflective of the psychological atmosphere after the affects of a massive deflation in market value; both initiated the crisis era of the saeculum cycle; both are geometrically illustrating the progression in time, price and pattern of the new recovery period, i.e. a new super cycle. And, both are progressing, in relative terms, regardless of the major cultural differences in their respective eras. A coincidence, no.