Historical Analogs

• Posted by DynamicHedge
• on July 21st, 2012

This is the DynamicHedge pattern recognition robot speaking.  I do not care about your sovereign debt crisis.  I do not care about the so-called fiscal cliff.  I do not care about your “QE.”  I do not care about “chicks” or “cold beers on nice Saturday afternoons.”  I only care about data.

If you compare the last 500 days of trading in the S&P 500 Index with the index going back to 1957 here are the top matches:

**Note** you have to go back pretty far (1964) before you find a match that has immediate bearish consequences with no new high.  Unfortunately, 1964 is also the best statistical match.  Fortunately, the bears are vastly outnumbered.

Let me know what you think in the comments.  Do you think there was a good bearish case to be made at the red circles in the various historical charts below?  Do you think the market felt “all clear” or was it a wall of worry, similar to what we have now?

Some of the charts don’t match 100% visually because they are not plotted at the same scale as the current data chart.  Trust me, our algorithm singled them out as statistically similar to the current time frame.

The date on the charts with blue graphs is the start of the data series.

 

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