Is This The Chart The Bulls Are Banking On?

Tyler Durden's picture

The period from 2003 to 2008 has been nicknamed 'The Great Moderation' as credit spreads collapsed close to zero, free-wheeling securitizations flooded the market with liquidity which repressed every credit instrument and forced investors to reach down in quality and out the curve for every extra tick of yield or carry. The period from the lows in 2009 could well be nicknamed 'The Great WTF' as credit spreads collapsed back down, and free-wheeling central banks flooded the market with liquidity which repressed every credit instrument and forced investors...blah blah blah... It would appear from the analog below that while markets do not repeat, they sure like to echo. We just remind those bulls looking for the next 18% lift that the analog period is when reality started to come out from behind the curtain - beginning in 2007...The Great Realization.



Need a reminder what happened from Nov 2006 onwards (via St.Louis Fed):

Crisis Timeline

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flacon's picture

I'm trying to make as much paper money as possible so I can convert it to tangible wealth. I'm already debt free, and own a lot of phyzz. 

Sovereignbeing's picture

Me too. I just keep on stacking.

Dr. Engali's picture

Keep levering up bitchez... the third time over S&P 1500 won't be the charm.

Keyser's picture

That's when the music stops.

DeadFred's picture

Why all the worry from everyone? We haven't gone through the highs yet and they proved pretty tough last times. If it turns around now we will have a strong pattern of lower highs and lower lows. Plus the 50 dma keeps climbing like a rocket. The last downturn had the market fairly oversold when it hit the 50, if the top holds the next time won't be that way. I'll be dumbstruck surprised if the crunch waits for several years the way this chart implies. Things are much more frgaile this time around and missiles could fly anytime. I'm not covering until the QE3 spike is taken out as a high. I still think it's the top.

jeff montanye's picture

and the fundamentals 2006 vs. 2012 seem wildly different, to 2012's disadvantage: ongoing european recession, budding chinese and u.s. ones, plunging corporate earnings vs. inflated estimates.  seems later in the game now.

max2205's picture

Dance till the music stops

fonzannoon's picture

This is not 1929 or 1932 or 2007 etc.  When this jumps the tracks it's the end of the market.

Jason T's picture

It's the greatest crisis since the 14th Century.. 1345 the Bank of Florance collapsed triggering a collapse of credit, then in 1348, the plague hit.

Harbanger's picture

Good point about plauges after a mass crisis.  Most people don't consider what follows a collapse. 

flacon's picture

And back then they didn't even have the CDC or engineers developing lethal toxins. 

Harbanger's picture

Yes, and I like your earlier point about making as much paper money as possible and converting it to tangible wealth.

fourchan's picture

re chart: sweet 1700 coming up!!

darteaus's picture

Medeci, da Vinci, Machevelli, Michelangelo.

Interesting times to read about.

nmewn's picture

Head & shoulders...its not just for showering nominal riches on the undeserving anymore.

Cui Bono's picture

OT sort of.....

The first rule of Fight Club is.... Don't fucking ever talk about Chanel!

rajc's picture

It can never happen again ;)

Tom Green Swedish's picture

Debt  = Money, 16 trillion in debt - Is it funded?  How do they pay this back to us or how do we pay this back to us (the government doesn't really do anything productive)? Russia defaulted on 12 percent debt to GDP, Japan has 230 percent GDP in debt.  What is the breaking point?  High interest rates? Loss of confidence?


The only thing that will get us out of this mess is to being export dependant and we need more debt to do this, but hey Japan has a suprlus but still 230 Debt to GDP the highest in the world.  So why not just print when the interest rates are low?  This isn't 1982.


If we go into an austerity program we'll go into a depression.  They might not be doing the right thing they are doing the only thing. We are not competitive with 2 dollar an hour sweat shop workers.


We have a couple options.  CEO's of big companies like Apple bring the work back from China and take a big hit to their stock price and profits, while losing out on potential markets because we hold all the cards, which will not work because we will never have a surplus because nobody will ever be able to buy the stuff.


Two, do nothing.  This is probably our only option considering the government will not accept austerity because they don't have to, and we can't go on ruling the Earth now since we have such a huge debt burden.  Bad Choices were made and there's nothing we can do now.

Spastica Rex's picture

Warp drive will be invented soon and then it'll all be good. Don't worry.

Tom Green Swedish's picture

Well think of it this way.  You're playing a poker game and you have 30 percent of the chips.  You know 1 of the other players is cheating but you don't care. The other players are gradually taking your chips because you are playing stupid. We cannot reduce the external debt (really the only important thing) because the other players can't bet much. The only thing we can do right now is try to balance the budget and stop the bleeding. Just try to balance it. 

espirit's picture

Uh Tom, not sure what flavor koolade you're drinking.  When the defense and security portions of the budget surpass all revenue taken in (i.e. taxation), that leaves nothing else for any other programs.  Or perhaps I misconstrued the definition of "balance".

All Risk No Reward's picture

It is impossible for society to pay back their debt UNLESS two thinkgs occur.

1. The oligarchs divest all their monetary wealth in order to pay back our debt.

2. Not a single Federal Reserve Note has ever been lost, for any reason, since that slave paper was created in 1913.

This is how that Debt Money Tyranny Trojan Horse works in flow chart format:

Pass it along.  Please.  My people perish for lack of knowledge.

steelhead23's picture

I am counting on QE^google to finally and forever save the day.  Hopefully, long before then I will have succumbed to Alzheimers and really won't give a shit.

Just curious - does anyone know what the DJIA would be if the average P/E were say 10 or 12?  It is possible that when the crash comes the average P/E ratio might be even lower, but 10 to 12 seems a rational place for it to stabalize.  I'd bet one of you guys could whip out a nifty spreadsheet in five minutes.

Tom Green Swedish's picture

It would be right around where it was last year about 11,400 at 12 P/E. Around 9000 - 10000 P/E 10.

Dr. Engali's picture

A 12 multiple on the S&P puts us around 1060. A 10 multiple puts us at 880. Give or take a few points. What we need is a good sell off to put us around a 5 multiple and then you have a great buying opportunity.

fonzannoon's picture

Doc I saw you said earlier that Perot just endorsed Romney. I was reading a few weeks ago that he refused to endorse either candidate. It was those little things that gave me hope that there are people high up enough that actually give a shit and maybe we have a shot after all. Even if it is because he is staring at the end of the road and does not need to play the game. To hear that he folded kind of sucks.

Dr. Engali's picture

I here you,I bought his line too.. it wasn't until much later that I found out the truth anout him.Unfortunatly Perot was just a player. He made out well either way when it came to NAFTA. He was as corrupt as the rest of them.

brak's picture

can they pump another 18% into the S&P with QE+ and student loans?  

Seems like things will have to get slightly 'worse' so benny can step up his printing

Tombstone's picture

This time it's different because The Dictator is about to launch a new 5 year plan so we can follow in the path of 1960's Russia.

Randall Cabot's picture
"Is This The Chart The Bulls Are Banking On?"

What else could explain that IBM, INTC, FTNT,APOL and LLTC all got hammered after hours but Futures are green?!?!!

DowTheorist's picture

If the forecast is right, market action will tell us. For those followers of the Dow Theory, and even those that merely use moving averages (although they are less responsive than the Dow Theory), we would see a bear market signal if markets are to go substantially low. Since the Dow Theory tends to be more responsive than moving averages, sell signals are flashed at ca. 10% from the top. Not so bad and in the meantime it allows the investor to participate in the trend until exhausted.

Thus, the Dow Theory complies with the basic rule of investment: “Cut your losses short, let your profits run”. This is accomplished thanks to the Dow Theory trailing stops. More on them here:

Under Dow Theory, we always know how much we stand to lose whereas the profits are open ended. One thing is clear, on June 29, the Dow Theory signaled a new bull market and such bull market remains in force until negated by a bear signal. More on the primary bull market here:

Primary bull markets have long legs and we are not talking of a "tradable" rally. We are talking of something very powerful that can last 1-2 years (in spite of occasional corrections) and witness gains exceeding 40%. However, it is always good to hear what learned people have to say. It helps us determine whether we are in the last phase of a bull market or in the beginning and whether there is head or tailwind. By factoring those factors in, we can better allocate funds between different asset classes (i.e. more gold which is in a bull market of its own).

Lost Wages's picture

The Great Realization has been cancelled and replaced with the Infinite Ramp to Chaos.

moneybots's picture

"If we go into an austerity program we'll go into a depression."


We are already in a depression.  Food stamps hit a recent new record, over 47 million.  One does not get around the math by not doing austerity.  I saw a picture of a Zimbabwe billion dollar bill.  That would mean that the people of Zimbabwe are filthy rich in Zimbabwe dollars.  Are they better off than Americans for a lack of austerity?


1+1 ALWAYS = 2.