October 21, 2008
Prices recovered smartly, and -after small losses on Friday- combined with Thursdays rally, have recovered and more than made up last Wednesdays drop. Do these strengths signal the bottom of the current cycle; do they forecast the beginning of prices returning to 2007s levels?
The uncertainties of our financial situation, of course, cloud judgments and hang over fundamental analyses. Yet a comparison of the current cycle, with the pattern of the last, 2000, price cycle provides a meaningful insight.
Clearly, the 2008 drop seems to have reached a bottom that is similar to the up and down experience at the end of the 2000 experience. In addition, the previous cycle is extended for another month, comparable to the end of November 2008.
Thus, if history repeats itself, good news is ahead on the price frontier. Nevertheless, a quibble is possible, by pointing to the steeper and longer decline, as a foretaste of further weakness to come.
DJIA 4.67 percent
NASDAQ 3.43 percent
S&P500 4.76 percent