Dow Jones Industrial Average by dreamtrove

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Dow Jones Industrial Average

POSTED BY: DREAMTROVE
UPDATED: Thursday, September 3, 2009 13:37
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Thursday, September 3, 2009 7:25 AM

DREAMTROVE

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Thursday, September 3, 2009 7:52 AM

PIRATENEWS

John Lee, conspiracy therapist at Hollywood award-winner History Channel-mocked SNL-spoofed PirateNew.org wooHOO!!!!!!

FAKE.

Log periodic charts don't apply to counting whole numbers.

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Thursday, September 3, 2009 8:00 AM

SIGNYM

I believe in solving problems, not sharing them.

Another bubble.... that's what happens when you throw $$ at investment banks....

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Thursday, September 3, 2009 8:41 AM

BYTEMITE

Actually, as Piratenews mentions it, there is something funny with that log graph. Log graphs represent powers of ten. Like up until 10^1, the 10^0 section is 1,2,3, etc. But when you hit 10^1, the numbers should go 10,20,30... And so on. But here, you're still within the base ten^3 power, but the divisions are labeled 2000, 4000, 6000, 8000, 10000, 12000, and 14000.

I don't know that that invalidates the data, but that is a silly mistake that calls into question the credibility.

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Thursday, September 3, 2009 8:42 AM

PIZMOBEACH

... fully loaded, safety off...

Quote:
Originally posted by dreamtrove:

A. Chart of America's Global influence.

B. Chart of the average US citizen's accumulation of useless stuff.

C. Chart of the average weight of the average US citizen.

D. Needs to be adjusted for inflation.

Scifi movie music + Firefly dialogue clips, 24 hours a day - http://www.scifiradio.com Now available on your iPhone

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Thursday, September 3, 2009 8:48 AM

SIGNYM

I believe in solving problems, not sharing them.

Not a mistake, just another way to represent data.

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Thursday, September 3, 2009 8:51 AM

BYTEMITE

Hmm. I've never seen people able to be creative when labeling a log graph. The log graph labels I always thought were kind of standard, based on the purpose of using a log graph.

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Thursday, September 3, 2009 9:26 AM

NIKI2

Gettin' old, but still a hippie at heart...

Pizmo: Excellent!

Bite: Maybe it's because it's impossible to show details on one page, given 0 to 2K took a loooong time, then everything else is compressed? Seems to me it would have to be a HUGE graph, with few details, if it was done traditionally...?

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Thursday, September 3, 2009 1:37 PM

DREAMTROVE

Pizmo

Nice. I was getting discouraged reading down. (John, sorry, but that comment was on the level of "Proof! Humans never landed on the Earth!")

To anyone questioning the data, that's just a chart of the actual data, drawn in logarithmic fashion, the only fashion used, by Yahoo! Questioning the data is sillier than questioning holidays on the grounds of calendar drift.

The graph was just a statement in itself, more than an argument. The DJIA is not an integer, but it wouldn't matter if it were. If you want to criticized the Dow Jones, by all means, go ahead: It's an artificial construct, stocks are changed all the times and the majority are now not industrials at all but financial firms.

Still, the DJIA has an advantage over more accurate representations of the market such as the NASDAQ, and that is, in a word: History.

You can call up a graph of 80 years of data. That enables analysis. If this graph has one flaw, it's that it is not adjusted for inflation. So A, B and C are funny, and D is of course accurate.

But more than that, I was working on the theory that people who post here are usually career professionals and some other than me would have worked in the financial sector, and the issues would have been apparent. So, does anyone read graphs?

(Defending the nature of the graph would be like defending the phonetic structure of the English language that this post is in.)

The problem with inflation is that CPI figures are also manipulated. The value of commodities, labor, also change, the population of the US changes, the number of stocks on the exchange changes (When the index was introduced in 1889, it was a representative sample of 10% or so of the market, now it's 0.01%, because it's still 30 corporations out of 300,000, or 30,000 publically held.)

So sure, we don't have precise data. But here.

That said, I tend to view all charts at a slant, and just say, "okay, this is the base growth rate of the graph:" and then I don't need to understand why.

If a population doubles every year, and you are looking at the number of cases of malaria per year, then the only way to look at those numbers objectively would be on a logarithmic chart against a 100% annual trend. The objective way to look at the market is the same.

I call the attention to the right hand side of the graph. Red indicates down. (We're looking at japanese candlesticks here, a fact no one commented on.) Pair that with the volume bars at the bottom. The higher the volume, relative to adjacent volume bars (absolute volume is meaningless as the number of shares extant change as well.) High volume means strong bars. So, higher volume on the recent decidedly large red bars indicate very high amounts of selling pressure on the market.

Now the Dow is a leading indicator, so this is not good. If you recall the market crash of 2000, then the recent Dow activity would be indicating a future stronger crash in the making. We had an 86% drop in 2000, the second strongest drop in history, after the 89% drop in 1929. The dow shows about a 35% drop in 2000, vs. a 50% drop recently, with a 50% market drop overall. This is a classic head and shoulders pattern, which means, ouch.

Specifically, the "measured move" here is 4000. I think that takes not-nuclear-physics to see. The harder thing to guess is the timescale. If we played completely by the rules, then we'd see a crawl to 12,000 by 2014 or so, and that would stave off a complete market collapse. The problem with that scenario is that stock market crashes generally don't play by the rules, they tend to throw the rule book out the window, a long with a couple of brokers.

For anyone missing the point: Leading indicators happen first. The dow is not the market, it's a tiny % of the market that moves first. That signals future direction of the rest of the market.

Why should you care?

Equity, or shares of stock, are the capital base used by companies for the expansion of business. With no equity, there can be no future employment. No new hires means that all those unemployment figures become completely cumulative. Also it means young people are screwed, but you already knew that.

How bad is bad?

If the straightforward project is correct, this means about a 20 year depression. That's pretty bad.

How soon?

I don't know, but this isn't encouraging: The chinese market is down about 33% over the last month. This on the heels of the 2008 disaster(70%):
http://finance.yahoo.com/echarts?s=000001.SS

Nothing I see makes this picture look any prettier. As for the current plans to balance the budget? Well, I don't want politics in an economic thread, but if no one has any income, the US govt. will have no tax revenue, and so the only way to pay the interest on the debt will be to borrow money, which means the currency will be devalued.

How much?

Nearly impossible to say. There are some dire predictions out there. My guess is that the FED will do everything in its power to keep the dollar up. Absent that, I'd say 100:1 devaluation would be fair, but I'm guessing it's not going to be that much. 10:1, maybe 4:1. The good news is that domestic prices are going to collapse. Buying a house for half a million? Try 10:1 or 100:1 on that, 50k easily, 5k more likely.
Same for a used car, forget 5-10k, and think more 500-1000, or 50-100.

Where do you put your money so that you don't sink with the prices?

I'm open to any ideas, and not to interested in the usual Gold! because it's shiny!

What if I'm wrong?

Then you've just protected yourself against a non-existent apocalypse, which you can as an FFF member chalk down to the 4th time that's happened to you :)

What about people with an enormous amount of debt?

Ouch. It's likely to follow you with very high interest rates. I'd try to get rid of it. If you find yourself carrying a quarter million in debt when US salaries take the dive, ack, I don't even want to think of it.

Where would I put a target for salaries of the future?

$1,200-$12,000 (2009 dollars)

How will this correlate with a currency devaluation?

Salaries won't visibly change that much unless devaluation gets out of hand, in which case they'll go radically up and create bracket creep, meaning everyone will be pushed up at least a tax bracket. Worst case: you end up in the 50% bracket with 20% FICA, 10% state, so 80% plus property tax, 401k, etc. (better not be holding any debt.)

This is just my spot analysis. Anyone else care to make a go at it, please, by all means, that's why I posted it. Not just heralding "Incoming!" which I thought was what the image was screaming, but to hear some thoughts on that.

I could of course be entirely wrong. At the very least, it looks worrisome, the way a spiral white cloud with a pinhole in the center in the gulf of mexico looks worrisome.

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