1930 Dow Comparison Hitting Too Close to Home

Jun 29, 2010: 9:27 AM CST

Over the last year, I’ve been updating charts comparing today’s market to the Crash/Recovery phase from the 1929/1930 period.

In the most recent update, I showed a “Haunting Look at the 1930 Crash/Recovery Phase” and this post is an update of that “haunting” chart, but this time with a larger chart and a direct side-by-side comparison.

Let’s see it:


(Click for the full-size chart – too small to see in this window)

I created this chart using TradeStation on a widescreen monitor, so it’s not your usual chart – it’s actually two charts side-by-side.

The Dow Jones weekly 1930 chart is on the left and the Dow Jones Daily chart up to June 29 2010 is on the right.

I wanted to hit the highlights of the clearest structural comparisons – use the circled numbers for reference:

1.  Failed/Busted Head and Shoulders Pattern after an initial rally

2.  Positive “Golden Cross” of the 20 and 50 EMAs (the EMA structure is identical before and after)

3.  New Recovery High forms on Lengthy, Multi-Swing Negative Momentum Divergence

4.  Sharp Sell-off takes price under key moving averages (and new momentum lows form)

In addition to these four structural points to watch, I’ve also labeled a 5-wave semi-Elliott Count, but I suggest thinking of the numbers not in terms of Elliott, but in terms of reference points.

Point 1  was an initial swing up off the low with 2 being the ‘failed’ head and shoulders pattern.  Point 3 compares the sharp rally that formed from the busted head and shoulders pattern.

Point 4 was a quick sell-off back to the rising 20 EMAs and point 5 was a ‘fluff’ rally that comprised a non-stop ‘popped stops’ phase that ended with a crash in both cases.

The comparison still has price sitting on the key support line, which will determine whether the comparison continues (like watching a horror movie unfold in real life) or ceases to be.

The level in 1930 was 260 and in 2010 it is 9,800.

It’s possible that we’re in the first downswing after the ‘crash’ from new recovery highs, and if so, then we may have one more rally higher in the market, particularly if we find support at the 9,800 level and bounce from there.  That would follow the script more accurately.

Either way, I think all market participants are watching the 9,800 level, and a break under there will …

We’ll discuss that when and if that happens.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

6 Comments

6 Responses to “1930 Dow Comparison Hitting Too Close to Home”

  1. Vishalrup Says:

    WHAT HAPPENNED TO DOW AFTER HITTING 260.HOW MUCH DID IT CRASH TO FROM 260 WHAT WAS THE LOW IT MADE?

  2. Corey Rosenbloom, CMT Says:

    I was hoping no one would ask!

    The Dow bottomed two years later at 40. Yes – index level 40 – in July 1932 – down 80%.

  3. Jim Says:

    Corey: Love your blog. Great insights… could I trouble you to post a chart of the Dow form the crash in '29 to the lows in '32, please? Would very much appreciate it!

  4. Corey Rosenbloom, CMT Says:

    Thanks Jim!

    I'm not an alarmist and I don't believe that our current market will continue the script indefinitely, and I know that if I posted a chart of the future, I would be criticized as a perma-bear for it.

    Just imagine a steady, stable two-year sell-off – characterized by small intermediate rallies – from 240 to 40.

    If we break to new 2010 lows sharply, I may post a slight glimpse into the future, but not the whole picture.

  5. Friedman's Ghost Says:

    Either way this game is going to end. There must be some severe suffering on EVERYONE's part before this is going to get better. Let's pray the idiots do not decide that global war would be an good answer to inflate markets.

  6. n2thezonez Says:

    Nice chart comparison, I printed that one out.