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2008 correlation to previous crashes

  1. 3,360 Posts.
    Comments and charts courtesy of Bill Cara

    The question on the minds of long-term oriented traders (self-directed and otherwise) is where does the market stand today relative to 1973-1974 and 1987, which were the two worst Bear markets in the past 75 years.

    These charts show an amazing correlation:

    With the S&P 500 from May 15, 2008 through Nov 11, covering 126 days, compared to the period from Apr 2, 1974 through Apr 1, 1975, the correlation (R^2) is 0.94.



    With the S&P 500 from Aug 14, 2008 through Nov 11, covering 63 days, compared to the period from Aug 26, 1987 through Feb 24, 1988, the correlation (R^2) is 0.94.



    From this perspective, which is the one I share, the US equity market continues to work through a cycle bottom. This is the period where cash ought to be put to work seeking opportunity for long-term reward
 
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