Perhaps the U.S. stock market senses this on some subconscious level, which is why it’s exhibiting the sort of financial bipolar disorder we’ve diagnosed the last couple of weeks. Yesterday brought us another manic episode, propelling the major indexes up nearly 3% and the Dow past 10,000 again, for no obvious reason. Today? A depressive episode. Markets opened down nearly 1%. Before the open, the Commerce Department reported a 1.2% drop in retail sales from April to May… the first drop in eight months. This is another one of those “unexpected” numbers that are increasingly whacking traders upside the head. In this case the numbers were “much worse than expected,” according to MarketWatch.
The folks at Westwood Capital put together these nifty charts with two commonalities -- a bubble peak and a period of panic selling followed by a rapid rebound. You’ll also see what may turn out to be a third commonality -- the rebound petering out in April 1930, and perhaps doing the same in April 2010.
Obviously, there are differences. In ’29, it took only three months to go from peak to trough. This time, it took nearly 18. As Mark Twain said, history doesn’t repeat, but it does tend to rhyme.
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