Stock Market Eerily Following Same Pattern of Bull Market Before the 1929 Crash

The chart above should scare the hell out of anyone looking at it. It parallels the markets behavior right before the 1929 crash that lead to a long, deep depression.

The chart superimposes the market’s recent performance on top of a plot of its gyrations in 1928 and 1929. The picture isn’t pretty. And it’s not as easy as you might think to wriggle out from underneath the bearish significance of this chart.

Yet the market over the last two months has continued to more or less closely follow the 1928-29 pattern outlined in that two-months-ago chart. If this correlation continues, the market faces a particularly rough period later this month and in early March.

The chart was first publicized in late November of last year, and the correlation since then certainly appears to be just as close as it was before. To be sure, as McClellan acknowledged: “Every pattern analog

Tom Demark added in an interview that he first drew parallels with the 1928-1929 period well before last November. “Originally, I drew it for entertainment purposes only,” he said—but no longer: “Now it’s evolved into something more serious.” (source)

When the Wall Street stock market crashed in October 1929, the world economy was plunged into the Great Depression. By the winter of 1932, America was in the depths of the greatest economic depression in its history.

The number of unemployed people reached upwards of 13 million. Many people lived in primitive conditions close to famine.

In St Louis, more than 1,000 people lived in shacks made from scrap metal and boxes. There were many similar Hoovervilles all over America. (source)

Between 1 and 2 million people travelled the country desperately looking for work. Signs saying ‘No Men Wanted’ were displayed all over the country.

Causes of the Depression

• As early as 1926, there were signs that the boom was under threat – this was seen in the collapse of land prices in Florida.
• Eventually, there were too many goods being made and not enough people to buy them.
• Farmers had produced too much food in the 1920s, so prices for their produce became steadily lower.
• There were too many small banks – these banks did not have enough funds to cope with the sudden rush to take out savings, which happened in the autumn of 1929.
• Too much speculation on the stock market – the middle class had a lot to lose, and they had spent a lot on what amounted to pieces of paper.
• The Wall Street Crash of October 1929 was a massive psychological blow.
• America had lent huge sums of money to European countries. When the stock market collapsed, they suddenly recalled those loans. This had a devastating impact on the European economy.
• The collapse of European banks caused a general world financial crisis.

Effects of the Depression

• Unemployment – 13 million people were out of work.
• Industrial production dropped by 45 percent between 1929 and 1932.
• House-building fell by 80 percent between 1929 and 1932.
• The entire American banking system reached the brink of collapse.
• From 1929 to 1932, 5,000 banks went out of business.

There is no complete record of how many people starved to death or died from malnutrition and deficiency diseases caused by poor diet during the depression. We can be sure that deaths occurred, but lack of transparency by the Hoover regime, and a lack of nationwide record keeping means we will never know exactly how many lost their lives.

Starvation, vitamin deficiencies, malnutrition, immune disorders and suicides would all have increased during such a major downturn. History teaches us that this happens after any major disaster, economic or otherwise. Incidences of diseases like typhus and typhoid would have increased in the shanty towns that sprung up in some parts of the United States.

All this in a country that had less than half the population than it currently has. Lets hope for all our sakes that the similarities between 1929 and 2014 are just that, and a second great depression does not come to pass.