Observations:
● Performance near the beginning of both centuries is strikingly similar.
● The turn of both centuries are the focus of major tops.
● In the 20th century, the first major bottom was in Oct. of the 3rd year (1903).
● In the 21st century, the first major bottom was in Oct. of the 2nd year (2002).
● The bear markets ending in 1903 & 2002 lost 46% and 38% respectively.
● The second bear market in the first decade of the 20th century ended in 1907.
● Performance near the beginning of both centuries is strikingly similar.
● The turn of both centuries are the focus of major tops.
● In the 20th century, the first major bottom was in Oct. of the 3rd year (1903).
● In the 21st century, the first major bottom was in Oct. of the 2nd year (2002).
● The bear markets ending in 1903 & 2002 lost 46% and 38% respectively.
● The second bear market in the first decade of the 20th century ended in 1907.
| Summary: The Dow Jones Industrial Average during the first decade of the 20th and 21st centuries is included above. The first decade of the 20th century is shown as a green graph with index prices on the left axis and dates shown at the bottom in green. The first decade of the 21st century is shown as a red graph with index prices on the right axis and dates shown at the bottom in red. The four and one-half years prior to each decade are also included to show market appreciation as investors approached the dawn of a new century. Both decades formed huge rounded tops, (A-B-C1) and (A-B-C2), with both tops centered near the turn of the century (B). Both ascended to the turn of the century (A-B) with very similar rates of appreciation. Both decades followed the same general pattern until point C1. The first bear market of the present decade ended one year earlier than the first bear market of the 20th century (C1 vs. C2). The present decade's first bear market was less severe but, with the slower recovery to point D, has achieved a ten year performance very similar to, but slightly below that of the previous century. The major bottoms of 1902 and 2003 occurred in October. The panic of 1907 bottomed on November 15th. Theory: It is hard to resist the temptation to speculate about the cause of the significant similarities between the two time periods. Many have felt anticipation of a prosperous future as the dawning of a new century drew near. We have seen in our century that those expectations were frustrated by a severe bear market. Our technology, wealth, industrial and military dominance dwarfs that of the previous century. However, as decision makers, we have bid up and down the prices of stocks in basically the same pattern. Man is still man. He is subject to similar strengths and weaknesses, motivations and delusions. Possibly we avoid the mistakes of our fathers and thereby commit the errors of our grandfathers. We should learn from both. How can I use this information? Several consecutive years of a rising stock market may encourage many to forget that tumultuous times will return. They always do. The reputation of bear markets to end near Halloween is enhanced by the above graphs. Investors must always look forward. Accordingly, be wary of the period leading up to October of 2007. Investors were probably feeling peaceful, prosperous and optimistic at point D in 1906. By November of 1907, the Dow was down 49% from its all time highs. Don't expect recent gains to continue forever. Be emotionally prepared to shift to bearish positions. As previous Investment Tips issues suggest, abundant reasons for a downturn exist. SignalTrend's unemotional computer timing system is currently bullish, but it may change its buy / sell signal in the near future. If that happens, SignalTrend will notify you by email. Remember, SignalTrend's stock market timing system was backtested 100 years with excellent results! P. S. The above research on this issue of Investment Tips was initiated by a request from one of SignalTrend's European subscribers. If you have a topic or theory you would like to know more about, please fill out the "Suggest a Topic" field below and click submit. If your topic is accepted, SignalTrend will do the research for you using our computer programs and extensive database. We want you to get the most out of your subscription to SignalTrend! All of the above data is for the Dow Jones Industrial Average (DJIA) excluding dividends. |
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SignalTrend
Signals the Trend... in Stocks and Interest Rates Backtested 100 Years !
1896 1897 1898 1899 1900 1901 1902 1903 1904 1905 1906 1907 1908 1909 1910
| 40 |
| 60 |
| 80 |
| 100 |
| 20 |
| 5600 |
| 8400 |
| 11200 |
| 14000 |
| 2800 |
| DJIA 1996-PRESENT (RIGHT SCALE) |
| DJIA 1896-1910 (LEFT SCALE) |
| DJIA: 1996-Present Superimposed on 1896-1910 |
C2
D
B
A
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
/
| 9/11/01 |
C1
| DJIA 1896- 1910 |
| DJIA 1996- 2006 |
E
| 10/27/06 |
| More |