TDI Podcast 85: PinPoint Charting the Next Market Move

November 30, 2008

Guest: Brian Shannon, AlphaTrends.net provides insight and direction of this ever confusing market. We review buy an sell rules along with some key tips on how to profit and limit losses. How is this market different from the 1929-1932 bloodbath? Will it continue to decline? Are we in rally mode or simply a bear market bounce? These are some of the questions answered in this episode.

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Brian Shannon founded AlphaTrends in an effort to provide unbiased technical analysis of momentum stocks or stocks that look poised for a large move in either direction. Brian is a veteran full time trader and self taught technical analyst who was previously Head of Research and Training Instructor at MarketWise.

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Click on the charts to enlarge

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Stocks Discussed: (SPY) , (QQQQ), (DIG), (UYM), (AAPL) (DJIA) Archer Daniels (ADM), Caterpillar (CAT), Berkshire Hathaway (BRK.A), PowerShares DB Agriculture Fund (DBA), PowerShares DB Com Indx Trckng Fund (DBC), General Motors (GM), Ford (F), Citigroup (C), Goldman Sachs (GS), Sears (SHLD)

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Written by Andrew Horowitz · Filed Under PODCASTS

Comments

1156Comments2008-12-01+04%3A59%3A43Andrew+Horowitz to “TDI Podcast 85: PinPoint Charting the Next Market Move”

Marcia on December 1st, 2008 11:45 am

Regarding your musing on parallels between 1929-1931 and the current state of the market. Yes, there are certainly parallels. However, one major difference that was recently pointed out (and I cannot remember where I read it so I cannot give credit where credit is due) is that following the crash in 1929 the Hoover administration did nothing. I don’t begin to know enough of the history to know if there were informed calls for action, or if the whole situation was so bizarre that no one knew what to do.

The Federal Reserve did not take positive action, wading into the markets with at least a million dollars of security purchases (a big number then) until the winter/spring of 1932, 15-18 months into the crisis. Worse yet, they actually increased the discount rate in October 1931 from 1.5% to 2.5%. The New York Bank of the United States collapsed in early December. By year’s end over 2200 banks had collapsed. Remember the FDIC did not exist.

Backing up to the first half of 1930, Congress passed and Hoover signed, over the objections of 1000+ American economists, the Smoot-Hawley Tariff act which was tremendously protectionist. Other countries quickly retaliated, and from a high in 1929, U.S. exports crashed. It is thought that while Smoot-Hawley didn’t cause the Great Depression, it contributed to it significantly.

There were all kinds of other factors in play, of course, as credit markets imploded in Europe, as major countries such as Britain and Japan went off the gold standard and banks collapsed around the world.

To return to my first point, while the various bailouts of the current administration in Washington may be way less organized than they should be, and while there is still probably a lot of bad stuff to come in the market, I don’t think we can draw exact historic parallels. Many things about the current situation are different. That’s not to say that the history of the Great Depression doesn’t offer us lots of lessons, because I think it does. I particularly think the observation in this podcast that the markets rallied into early 1930 and then declined over the next 18 months to 20% of the October 1929 lows is very sobering. But the historian in me says that we need to be careful and precise about the lessons we learn and the morals we draw.
Marcia on December 1st, 2008 1:57 pm

CORRECTION!

Sorry - way not enough zeros! The Fed injection into the securities markets in early 1932 was 1 billion dollars, in two $500 million dollar lumps.
snoopyjc on December 27th, 2008 8:05 pm

To see the current market drop superimposed on the last few “large bears” including 1929, check out this site: http://dshort.com/
–joe

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