Unscientific but interesting (a repost)and timely given rb's last post.
I had stumbled across that zeal intelligence chart comparing the Nas with the 20 DOW crash....maybe it was old but it not appear to be updated...so I decided to do some fiddling myself. Two charts to consider first
and
I then transplanted the March Nas peak with DOW 29 peak, relabelled the calender beneath it starting from March..and then plotted some points....using a conversion factor of 1 29 DOW point = 134.7 Nas points (inflation LOL!)
Now I didn't plot enough points to see how it matched up day to day (as an aside if anyone could provide links which would have daily closes to those indexes listed...I could write a program to plot one against the other) but there does seem to be a fairly consistent relationship between peaks and valleys...occuring roughly at the same time give or take a few weeks. For example the post 9-11 peak of the Nas corresonds to the June "peak" of 150 in 1931.
Ok so time wise the Nas is roughly in line with late Feb of 1932...as you can see the market action preceding that corresponds nicely to what has happened on the Nas. (by that time the DOW had lost 81% of its value, the Nas down 77% (july bottom)...so close enough for government work
So what preditcitons would we make? If it follows the same pattern the following would occur
The Nas goes back and has a successful retest of the 1192 July 24 low. It will rally to 1420-1450...suck back a bit then have a mini "blow-off" to 1500.
After that...pain...it relentlessly sells off for the rest of the year...with a bottom for the Nas between 565 and 615.
From there, in percentage terms it will rally hard for two months( Jan and Feb 03). However it will fail to breach, indeed even reach 1192 (which has become monstrous resistance) and then grind down until Sept...and then will go into rally mode again for the next few years ( it makes sense as by 2004 a major computer replacement cycle whould just be getting under way and maybe even telecom starting build out again and these companies won't just be lean they will be downright gaunt.
So now what about gold? Gold of course was fixed by arbitrary government fiat (a little dig at the gold fanatics!) and thus protected by the ravages of the real world deflationary forces at work.
However silver traded freely and may be used as a proxy. Now the only the chart I could find on silver during that period comes from Prechter;s latest "survive the crash" book.
silver basically went down with markets...silver did have a mid-deprssion rally which ended in a spike in Dec 1932. If you are wondering, yes that corresonds to June of 2002 on the Nas chart.
So if gold does what silver did, it will go down with markets. Indeed the price of silver did not bottom until Dec 1932 which corresopnds to June-July of 2003
Now I read somewhere (unfortunately gold eagle so I need to find independant verification)that silver stocks started going up earlier in anticipation of the bottom....so in my mind the bottom for gold stock will come when Nas is in its intial bounce off the 600 bottom to 1100.
Not possible? I think it is.
think of what sentiment will be like when the Nas goes from 1400plus to under 700...sentiment towards equities will just suck and that will go on to gold stocks as well.
Look what gold stocks did during the plunge in July...they went down as well.
Up to now the gold rally has had nothing to do with investment demand...it has been purely speculator led by people doing a contrarian play on the markets and USD. And the COTS shows the small spec players are long in large numbers while the large specs are going short.
As the market start their final plunge everyone will understand the majority of the drop is quickly becoming history, that the easy money has come and gone and it's time to hand over to bagholders
As well July showed that when there is REAL panic all aseets go down and there is a rush for cash and that includes gold? consider the following chart which compares XAU with DOW during 87 crash
so that leaves the DOW...well I can see a 40% haircut..with oil stocks and banks leading the plunge
anyways just some thoughts...