Shakespeare’s phrase from Hamlet, “the lady doth protest too much, methinks” comes to mind as MarketWatch follows up its story about the scary stock market chart with vigorous denials from Wall Street professionals that a 1929-style stock market crash is coming:
Mobster Al Capone once said of the 1929 stock-market crash: “I deny absolutely that I am responsible.” Today, many strategists find themselves fighting off suggestions of a looming repeat of that long-ago market rout.
Rising to the surface again recently is the so-called “scary” 1929 crash chart that maps out market performance from mid-2012 to the present for the Dow industrials and compares it to 1928 and 1929.
The 1929 chart grabbed lots of attention in November. At the end of January, market timer Tom DeMark stirred the retro pot again by telling CNBC that stocks could “unravel quickly” in days and have reached an inflection point that resembles the period before 1929. Then Seabreeze Partners’ Doug Kass (the man who has taken on Warren Buffett in another context) piped up in support.
MarketWatch’s Mark Hulbert addressed the matter this week with this headline: “Scary 1929 chart gains traction.” Readers haven’t stopped coming for the chart and staying for the scare.
Hulbert dutifully analyzed the whole thesis. He took issue with the skeptics’ argument that it’s just a retrofitted chart and that the differences in scale between the two moves makes it a ridiculous comparison. (Critics say the chart takes prices from a historic boom and bust, and compares them to a much smaller boom.) His conclusion: Many were laughing last November but far fewer are laughing now.
And maybe Kass, DeMark and a few others are sticking to their guns, but some strategists are just doing the eye roll.
Downtown Josh Brown took the fascination with the 1929 comparisons to task a couple of days after DeMark let loose and retweeted his message after Hulbert’s column appeared this week. “There’s nothing constructive about suggesting that price patterns indicate the coming of the next Great Depression,” concluded Brown in the blog post…
[continues at MarketWatch]