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The 75-Year Trendline Holding Stocks Back (For Now)

Tyler Durden's picture




 

Over 75 years ago a trendline was born. From the highs in 1937, the Dow Industrials have logarithmically oscillated around an inexorable drift. The current rally, as all asunder await the 14,000 level amid every boat being lifted non-stop, is testing this trendline for the fourth time in the last three years - and each time prior we have fallen back (unable to break above)... Yesterday saw us get close and this remains the longest trend to watch for more sustained strength.

75 years...

 

and Close-Up...

 

Source: Brad Wishak at NewEdge

 

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Wed, 01/30/2013 - 14:54 | 3199598 Glass Seagull
Glass Seagull's picture

 

Ben Bernanke:  "Haha!  Technical analysis doesn't work!!!"

[as his eyes nervously dart to the area on his bookshelf devoted to books about technical analysis]

Wed, 01/30/2013 - 15:02 | 3199635 machineh
machineh's picture

John Hussman: 'Haha! This is a "who's who" of WORST EVAH times to own stocks!"

[as his eyes nervously dart to the sea of red on his staggered-strike, leather-upholstered puts]

'Ring Prechter, pronto!' he orders his secretary. 'I need some old-time, tub-thumping bearish religion, even if it costs a thousand dollahs an hour!'

'Bob's locked himself in the bathroom and won't come out to talk,' reports Hussman's secretary. 'But Nouriel Roubini says he'll take your call.'

Wed, 01/30/2013 - 15:09 | 3199672 Thomas
Thomas's picture

If you inflation adjust that plot you will find a 1.7% per year return. Be interesting to see if that trendline fits. Key message: bulk of DOW's returns are dividends.

Wed, 01/30/2013 - 15:16 | 3199702 slightlyskeptical
slightlyskeptical's picture

If you really look at it, you will see that the chart doesn't even include dividends. Like so many analysis which only use the index levels. Any valid analysis will use total return metrics.

Wed, 01/30/2013 - 15:42 | 3199849 AlaricBalth
AlaricBalth's picture

Here is another long term stock trend chart with M1 added. Do stock prices effect the money supply or does the money supply effect stock prices?

http://research.stlouisfed.org/fred2/graph/fredgraph.png?height=480&log_...

Wed, 01/30/2013 - 16:30 | 3200064 tarsubil
tarsubil's picture

Nice chart. I'd say stocks go sideways then tank like in mid-70s. Money supply hits escape velocity and ultimately pulls the market back up into outer space.

Wed, 01/30/2013 - 15:37 | 3199816 Dr. Richard Head
Dr. Richard Head's picture

A 1.7% return per year means a loss every year, as that rate doesn't even beat the CPI measurement of inflation, let alone a true rate of inflation without hedonic adjustments.  This chart makes me verry happy to be out of that circus.  Now, if they could just end the US Dollar circus.

Wed, 01/30/2013 - 14:54 | 3199599 Ham-bone
Ham-bone's picture

so who's short?

Wed, 01/30/2013 - 14:57 | 3199613 firstdivision
firstdivision's picture

midgets

Wed, 01/30/2013 - 15:10 | 3199676 Thomas
Thomas's picture

Robert Reich. Also, many traders are long bonds/short brains.

Wed, 01/30/2013 - 16:07 | 3199952 resurger
resurger's picture

Dont worry, Investors are rotating to "Safety"

Wed, 01/30/2013 - 15:07 | 3199665 IamtheREALmario
IamtheREALmario's picture

Bernanke. It is why he does not shower at the club.

Wed, 01/30/2013 - 14:54 | 3199600 TrumpXVI
TrumpXVI's picture

So, that means BUY stocks, right?

Wed, 01/30/2013 - 15:08 | 3199668 CrashisOptimistic
CrashisOptimistic's picture
Despite a Lousy GDP Report, U.S. Economy is Primed to Expand

that's from Bloomberg

 

What monumental bullshit.  All the crap they lean on to claim it's all good internally was Sandy reconstruction that is utterly temporary.

I would never have believed that these fucking thieves could sprint to a microphone and bring themselves to say that a recession print of MINUS 0.1% was good news.  Have they no shame at all?

Wed, 01/30/2013 - 15:22 | 3199729 Spastica Rex
Spastica Rex's picture

Economically, all news is good news.

So is no news.

Wed, 01/30/2013 - 14:55 | 3199602 PUD
PUD's picture

TRENDS ARE ONLY VISIBLE WHEN THEY ARE HISTORY. THEY DON'T PREDICT

Wed, 01/30/2013 - 15:06 | 3199664 whotookmyalias
whotookmyalias's picture

As Ralph Kramden used to say, "To the Moon!"

Wed, 01/30/2013 - 15:09 | 3199669 Joe moneybags
Joe moneybags's picture

-1 for the pompous use of CAPS.

Wed, 01/30/2013 - 15:23 | 3199739 Spastica Rex
Spastica Rex's picture

-1 for the inaccurate use of "pompous."

Wed, 01/30/2013 - 15:32 | 3199797 Remington IV
Remington IV's picture

-1 for being a CHIMP

Wed, 01/30/2013 - 18:48 | 3200565 lasvegaspersona
lasvegaspersona's picture

-1 for failing to also criticize the use of BOLD

Wed, 01/30/2013 - 14:55 | 3199609 Cognitive Dissonance
Cognitive Dissonance's picture

It all depends on how thick you draw that trend line bro. Personally I use a big ass magic marker.

Wed, 01/30/2013 - 14:57 | 3199615 q99x2
q99x2's picture

I've got a trendline for ya.

Wed, 01/30/2013 - 17:51 | 3200372 mvsjcl
mvsjcl's picture

I see the trendline continuously expanding--oh wait, that's my waistline.

Wed, 01/30/2013 - 14:58 | 3199617 CharliePrince
CharliePrince's picture

trade  beans

Wed, 01/30/2013 - 14:58 | 3199623 AccreditedEYE
AccreditedEYE's picture

Difference between the past and now? Sound money policies were practiced up to the 1970's. BTFD

Wed, 01/30/2013 - 15:09 | 3199677 IamtheREALmario
IamtheREALmario's picture

Hmmm ... and what similarity is there between the make-up of the Dow in the 1930 and the Dow today? People act as if the chart means something when the abse changes year to year.

Wed, 01/30/2013 - 15:52 | 3199906 hannah
hannah's picture

it doesnt matter which companies because they are picked to reach a 'number'. the dow is just a number manipulated by the banks.

Wed, 01/30/2013 - 14:58 | 3199624 acdp
acdp's picture

Irving Kahn as next FED charman?

Wed, 01/30/2013 - 14:58 | 3199625 LongSoupLine
LongSoupLine's picture

Trendlines are for fucking rational analysis.

 

Bernanke has created a completely fucking illegal and corrupt fucking irrational system once known as a "market".

 

Fuck that fucker for what he's done and for what is going to happen due to his fucking actions.  May he fucking rot in fucking living hell before he sees the fucking business end of a fucking slow woodchipper.  fucker.

Wed, 01/30/2013 - 15:03 | 3199637 PeeramidIdeologies
PeeramidIdeologies's picture

I use the f-bomb a lot, but you sir, make me seem like a good Christian boy. Short much?

Wed, 01/30/2013 - 15:10 | 3199680 LongSoupLine
LongSoupLine's picture

Short much?

 

Not short one single fucking thing.  Long silver, physical.

That's what makes what I say genuine, and emotionally appropriate to the actions of those in power.

Wed, 01/30/2013 - 15:24 | 3199740 PeeramidIdeologies
PeeramidIdeologies's picture

Common old boy, I can think of a lot worse places to be. In fact I consider these to be good times. Maybe, just maybe, they will get this thing turned around and we can all step in the future without all these possible unpleasantries we're facing.

Wed, 01/30/2013 - 15:34 | 3199807 LongSoupLine
LongSoupLine's picture

WTF?

Wed, 01/30/2013 - 15:48 | 3199881 PeeramidIdeologies
PeeramidIdeologies's picture

I'm going to assume you live in North America, and if that's the case you should stop and take a minute to consider how good you have it. It's not perfect, no, but what is? If it wasn't for the Feds careful balance of liquidity and market purchases we would all be living in a very different world, with all the nasty deleveraging and whatnot. We're not out of the woods by a long shot but I, for one, do not want this thing to collapse. You don't like it go live in the woods and where you will actually have to work to survive. Otherwise STFU and enjoy the amenities you have.

Wed, 01/30/2013 - 16:18 | 3200006 Pure Evil
Pure Evil's picture

Is that you Berstanky?

Wed, 01/30/2013 - 16:18 | 3200012 PeeramidIdeologies
PeeramidIdeologies's picture

You silly down voting SOBs do you even know what your up against? This isn't going to a sporting weekend at Bernie's, where you get so show off your shiney AR, if this thing comes down. There isn't going to be a smiling face in town, whether you read ZH or not.

Wed, 01/30/2013 - 16:25 | 3200042 James_Cole
James_Cole's picture

"Otherwise STFU and enjoy the amenities you have."

Right on Peeramid! Everybody better enjoy these 'amenities' while the last, 'cause they sure as shit aren't going to be around after the circus leaves town. 

I always say to Greek folks complaining about minor details like their country being destroyed, "Yeah? But remember all the good times in early 2000? Remember when your books were cooked but nobody cared? Such great times!"

Who cares how this thing ends, Bernanke better give me dow 20k & spy 200, grandma be damned!!

Wed, 01/30/2013 - 16:26 | 3200050 Pure Evil
Pure Evil's picture

So, what's your point again?

Wed, 01/30/2013 - 19:36 | 3200723 LooseLee
LooseLee's picture

Spoken like a bonafide sheep; grateful for the crumbs they are thrown...

Wed, 01/30/2013 - 18:50 | 3200570 lasvegaspersona
lasvegaspersona's picture

I prefer to get my insane optimism from MDB.

Wed, 01/30/2013 - 15:15 | 3199696 DavidC
DavidC's picture

F-bomb?

DavidC

Wed, 01/30/2013 - 15:28 | 3199780 PeeramidIdeologies
PeeramidIdeologies's picture

I was going to say I fuck a lot myself but it seemed out of context..

Wed, 01/30/2013 - 15:43 | 3199855 DOT
DOT's picture

That's proletarian language as we once called it....er , rather "fucking proletarian language".

Wed, 01/30/2013 - 16:39 | 3200116 Sockeye
Sockeye's picture

You got a problem with haruspex?!
http://en.wikipedia.org/wiki/Haruspex

Wed, 01/30/2013 - 15:00 | 3199628 Uncle Zuzu
Uncle Zuzu's picture

And if you draw in a parrallel line the bottom part of the channel, connecting the lows of 1942 and 1982 and project to today, it gets us to about Dow 5,000.  Yikes.

Wed, 01/30/2013 - 15:05 | 3199655 whotookmyalias
whotookmyalias's picture

I'm a buyer at DOW 5000

Thu, 01/31/2013 - 06:55 | 3201853 Wraithlord
Wraithlord's picture

My charts show a strong technical support at 0. But beyond that I'm clueless.

Wed, 01/30/2013 - 15:06 | 3199656 Water Is Wet
Water Is Wet's picture

And if you draw a couple sinusoidal arcs separated by a few parabolas punctuated by a few dirac-delta functions, you get the flying batman formation.  YIKES!

Wed, 01/30/2013 - 16:18 | 3200008 eclectic syncretist
eclectic syncretist's picture

And if you look at the RSI its as high as it's every been.  YIKES!

Wed, 01/30/2013 - 15:00 | 3199630 centerline
centerline's picture

That's not a trendline.  It's a target.

Wed, 01/30/2013 - 15:07 | 3199662 Unprepared
Unprepared's picture

It's a threadline. Like this is.

Wed, 01/30/2013 - 15:03 | 3199641 firstdivision
firstdivision's picture

If the FOMC raise the FFR +.25%, I'll chop my dick off.

Wed, 01/30/2013 - 15:06 | 3199661 Water Is Wet
Water Is Wet's picture

Video or it doesn't happen.

Wed, 01/30/2013 - 15:27 | 3199769 firstdivision
firstdivision's picture

Welp now it doesn't need to happen.

Wed, 01/30/2013 - 16:20 | 3200018 Pure Evil
Pure Evil's picture

And, if it doesn't happen, we're gonna send in Lorena Bobbit.

Wed, 01/30/2013 - 15:05 | 3199646 GNWT
GNWT's picture

party like it's 1999...

 

at...

 

http://www.zirpinusa.com/

Wed, 01/30/2013 - 15:17 | 3199706 Black Forest
Black Forest's picture

Nice!

Wed, 01/30/2013 - 15:46 | 3199868 helping_friendl...
helping_friendly_book's picture

Tight!

Now that is something.

Wed, 01/30/2013 - 15:05 | 3199650 IamtheREALmario
IamtheREALmario's picture

Lol ... I have a straight edge too and could choose several different trend lines with that chart. The choice is the line was designed to support the point and not the other way around ... NEXT!!

Wed, 01/30/2013 - 15:07 | 3199658 PeeramidIdeologies
PeeramidIdeologies's picture

Why wouldn't it? It's blown through all reason at this point. It's going up simply because it's must. Pensions must be paid, the people must feel wealthy. I'm staying on both sides of the fence mind you. There is a bigger shit storm brewing then we have seen yet...

Wed, 01/30/2013 - 16:11 | 3199968 Black Markets
Black Markets's picture

The market is priced in USD you moron.

Currencies are crashing in value because we are in a currency war.

It's a race to the bottom (FOR CURRENCIES), everything else will fly to the moon.

Some real dumbasses on here.

Wed, 01/30/2013 - 17:12 | 3200270 PeeramidIdeologies
PeeramidIdeologies's picture

Sounds like we're talking the same book here bud, no need to be ignorant. Unless that's your thing

Wed, 01/30/2013 - 15:09 | 3199673 thismarketisrigged
thismarketisrigged's picture

im not going to chase stocks at these levels. ill wait till s&p goes to 500 and dow hits 5000. it may be a few years, but my patience will pay off. 

 

why  pay for something at these levels when i can get that same thing a much bigger discount

Wed, 01/30/2013 - 15:39 | 3199828 helping_friendl...
helping_friendly_book's picture

That has been my, unwavering, plan since going short in Oct. 2011. I've been getting gang banged by Timmy and Benny ever since.

I think I'm down over 50% but, I know if I hang in there another ten years or so it will really pay off. It kind of makes me an asshole and very hard to be around when I know I'm right but will, probably, go broke on that trade before the FRBNY relents. I have seen yields creeping up lately.

I have quit the market, except for that one position and a few dog stocks I refuse to sell, and am saving in cash waiting for the inverse bubble to pop and T bills yields to surpass 10%. It is just a matter of time and this time, 'damnit, I will be ready to buy those juicy yields and squeeze the Treasury.

Wed, 01/30/2013 - 15:48 | 3199883 johnberesfordti...
johnberesfordtiptonjr's picture

 

"The market can stay irrational longer than you can stay solvent."

-John Maynard Keynes

 

Wed, 01/30/2013 - 17:00 | 3200231 helping_friendl...
helping_friendly_book's picture

I have never played on margin.

The FRBNY trap is getting closer by the minute.

They will decide when they will short this market and make just as much money on the way down as they made on the way up. If you go to the right temple you will know when that is. The rest of us will have to be quick to recognize the turn.

I think it is getting closer since the talking heads are all saying to dive into equities so you don't miss out. I think that is code for sell, sell, sell.

Wed, 01/30/2013 - 22:34 | 3201144 andrewp111
andrewp111's picture

You may be right that the time to exit equities is nearing, but there is no way you will see double digit  interest rates again.

Wed, 01/30/2013 - 15:57 | 3199921 a growing concern
a growing concern's picture

I feel ya, man. I'm sitting on a position from 2011 that's in the absolute shitter. But at this point, it's down so much that there's no point in cashing out, might as well stay in it. If this shit ever does go down like it should, I'll be looking pretty good. Until then, just don't look at your portfolio...

Wed, 01/30/2013 - 16:07 | 3199956 Black Markets
Black Markets's picture

Only a dumbass would bet against the markets rising at a time when unemployment is sky high and the central banks have unlimited political capital.

You do realise you are long USD and short assets?

I repeat you are LONG USD !

So you are holding dollars whilst Bernanke is diluting you up the wazoo and he has the support of the government and the wider public to continue diluting you into oblivion.

And you are holding this position open?

Dumbass move, you deserve to loss the money.

Wed, 01/30/2013 - 17:09 | 3200194 helping_friendl...
helping_friendly_book's picture

Money is already gone. I was playing the volatilty in 2011 but the volitilaty dried up. I would play UPRO/SPXU and tag team the volatility. I bought 100 shares of SPXU. Big deal. I opened an account w/ Bank of China in NYNY on Madison, transfer money from my credit union and then convert the USD to RMB. That is up 10% since I opened my account because the yuan is getting stronger and I don't have to pay Cap Gains on arbitrage. I get a 1099 for th 0.10% interest I make and I have to pay tax on that which is practically nothing. The arbitrage is a freebee and 10% ain't bad. The best part is it is FDIC insured.

I am not putting money in the market. I put my 401a contributions into money markets. That makes a few points a year. I am not going to risk anymore of my savings getting shanked by the unmarket.

You have one more year until bubbles bernanke steps down and a new chairsatan starts raising rates and you lose your ass when the market plummets. They will probably put that yellen woman in or maybe jeff lacker who will have no mercy as he kicks the discount rate to 15% to soak up all that money that has been printed.

Some say Geithner will get the spot but, I doubt he would survive a Senate confirmation or even want to be subjected to one. 

I am not making a big return saving my money but, I am certainly not getting hammered, this year, in the market. I need to have plenty of cash in this environment. I keep a large amount of cash on hand preparing for the inevitable bank holiday when all the atm and credit cards stop working. When the right opportunity comes along I will have plenty of dry powder and it won't be stuck in some bank that is closed for a month while they devalue currency in your bank accounts.

People err when making investing choices. I have been playing the market since 2007 and had to pay cap gains every year. This will be the first year I have had a loss but, that is only if I sell. I haven't lost anything since I have neither bought or sold anything since Oct 2011.

Wed, 01/30/2013 - 22:32 | 3201133 andrewp111
andrewp111's picture

There is no way in hell the discount rate will ever go to 15% in your lifetime, and it doesn't matter how old you are either. The Fed is the Government's banker. The Government cannot pay the interest on such high rates (except through outright seigniorage). Therefore, they will not happen. Even a 3 point rise would be deadly to Federal finances. It won't happen either, at least not for 20 years. If rates even threatened to rise that much, the Congress would order the mintage of trillion dollar coins, and rates would go to zero again.

Wed, 01/30/2013 - 15:59 | 3199935 Black Markets
Black Markets's picture

Dreadful execution of your "plan" there.

The market simply represents the flow of money. Markets rise when money flows in and they fall when money flows out.

Why would you bet against the central bank during an era when the central bank has the political capital to do whatever the fuck they want?

Bernanke has spent his entire career dreaming up ways of fighting a depression. Then they actually let this guy have a turn at the wheel and it so happens its a time when central banks get unlimited political capital.

So guess what? He goes ape shit.

And you bet against it??? What a dumbass move that was. Don't you know what inflation is? Seriously?

Wed, 01/30/2013 - 15:10 | 3199683 BadKiTTy
BadKiTTy's picture

Blah Blah! Correct me if I am wrong (no, please do!) - but the 'trend' from '65-'85 was a tad down INCLUDING all the inflation. So one scenario is for 20 years of sweet FA in nominal terms and taking up the cha cha with inflation counted (yes I know.... there is no inflation....... gas here in the UK is over $10.... and yes I know our gallons are bigger! so no inflation here either).

Just sayin'

 

K@ 

Wed, 01/30/2013 - 15:14 | 3199697 Motorhead
Motorhead's picture

Trendline, bitchez!

Wed, 01/30/2013 - 15:17 | 3199704 Joe moneybags
Joe moneybags's picture

The long term log chart is actually very instructive.  The upward slope is quite simply, the exponential loss of value of the US dollar, i.e. the underlying inflation rate.  Therefore, we are about fairly valued on an historical basis.  But given todays ZIRP and Fed's printing, which are somewhat analagous to the Depression era and WWII years, we look destined to underperform that long term upper limit.

Wed, 01/30/2013 - 22:22 | 3201108 andrewp111
andrewp111's picture

No. It is the loss of dollar value (inflation) + any real economic growth. There was plenty of real growth in the past, not so much today.

Wed, 01/30/2013 - 15:20 | 3199712 IridiumRebel
IridiumRebel's picture

Walking in a Nuclear/Kondratieff Winter Wonderland!

Wed, 01/30/2013 - 15:57 | 3199838 El Hosel
Wed, 01/30/2013 - 15:44 | 3199859 GreatUncle
GreatUncle's picture

When you look at charts like these, exponential because that makes big discontinuities look small.

As the chart rises how you feel about it depends on what position you have taken.

Position yourself at the highest point there has been one heck of alot of devaluation if that number is not backed up with tangible assets to hold the value.

Position yourself at the lowest point looking up now, if you did not manage to achieve that level of growth wherever you stashed your wealth then you were devalued yet again. THAT IS WHAT HAS HAPPENED TO MANY WHO PLAYED THE GAME.

Did not matter where you put it neither, money moves for best returns so cross contamination is guaranteed.

Wed, 01/30/2013 - 22:19 | 3201104 andrewp111
andrewp111's picture

One would expect the market would rise on an exponential over the longest time horizon, because that is the math of growth or compound interest. However, I second the motion  to see a calculated trendline, and not just a manual drawing.

Wed, 01/30/2013 - 15:53 | 3199903 css1971
css1971's picture

rather than manually draw a trend line why not fit a least squares regression to it?

Wed, 01/30/2013 - 16:16 | 3199993 El Hosel
El Hosel's picture

Revert to the mean.... Bitchez   10,000

Wed, 01/30/2013 - 16:37 | 3200106 orangegeek
orangegeek's picture

Another day another indicator.  All probable signs that we are ready to tank.

 

SP500 weekly top in 2007 looks very similar to today's.

 

http://bullandbearmash.com/chart/sp500-weekly-climbs-17-points-volume/

Wed, 01/30/2013 - 17:45 | 3200109 ebworthen
ebworthen's picture

What this chart doesn't show is a loss of self sufficient homesteads, growth of petrochemical/genetic engineering dependent farmland, crippled productive capacity and labor participation, increased entitlement programs, debt spending, off-shoring of employment, parabolic rises in health/education/insurance costs, dollar devaluation, HFT trading, shadow banking, or loss of individual rights and liberties.

Other than that it is an interesting chart.

Wed, 01/30/2013 - 17:13 | 3200276 ComputerNerd
ComputerNerd's picture

Adjust that thing for currency devaluation and see what happens.

Wed, 01/30/2013 - 19:13 | 3200652 GNWT
GNWT's picture

party like it's 1999...

 

with the Silver Liberation Army...

at...

 

www.ZIRPinUSA.com

Wed, 01/30/2013 - 21:20 | 3200945 de3de8
de3de8's picture

Closer and closer to sucking in the retail, should not be much longer.

Wed, 01/30/2013 - 22:36 | 3201145 Aussiekiwi
Aussiekiwi's picture

The last sucker rally.

Thu, 01/31/2013 - 02:50 | 3201693 saveandsound
saveandsound's picture

I would prefer a chart which displays the 75-years long-term-average.

Thu, 01/31/2013 - 04:03 | 3201743 MeelionDollerBogus
MeelionDollerBogus's picture

Rather, this could be the flat-lining seen where the orange arrow is & the RESURGENCE to come - e.g. debasing currency, forced entry to market, confiscation of deposits by banks into the gaming/trading network(s). A singular trend line frequently does not describe a market accurately & this time it doesn't either. A clear alternative pattern of exponetial rise followed by bumpy flatlining, almost equal in years-span, is visible here. It could be 5 more years before the resurgence but that's the pattern I see.

Thu, 01/31/2013 - 15:56 | 3203600 neutrinoman
neutrinoman's picture

Oh, the dreaded flying Batman formation :)

This graph has an interesting implication. It implies that stocks were in a bubble, not just 1998-2000, or 1996-2000, but the whole 12 years, 1996-2008. Two economic cycles (or part of one, and all of another) were above the line. And, without a doubt, not coincidentally, that period 1996-2008 was when personal/household saving was negative and the debt bubble ballooned beyond anything in the past.

It means we're even more screwed than we think :D

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