A Mega Perspective

1929 Great Depression
"$100 will buy this car.
Must have cash.
Lost all on the stock market"

I managed to obtain the above semi-log historical chart of Dow Jones Industrial Index from 'Dogs of the Dow' website. From1900 until now the biggest bear market is the 1929 'Great Depression'. The drop was 89.2% over 34 months. If interpret the chart using Elliott Wave Principle, if the 1929 to 1932 drop can be considered as Super Major Wave I and II, from 1932 to the peak on 2007 is Super Major Wave III that consists of 5 Major Wave 1-2-3-4-5. Major Wave 2 is a simple ABC formation and Major Wave 4 is a complex ABCDE formation. Major Wave 5 from 1974, the end of 'oil crisis' to October 2007, consists of another 5 wave i-ii-iii-iv-v. From a mega perspective, the October 1987 'Black Monday' stock market melt down (in 10 trading days Hang Seng Index dropped 46%) and 1990 drop before the Gulf War are minor sub-waves. If the current bear market is a Major Wave 4, it has to be a complex wave with duration much longer than the 'Simple and Short' wave form of 1929 (89% drop in 34 months). In my November post last year, I was advocating a complex but shallow 3-3-3-3-3 wave form for a ABCDE formation similar to Major wave 4 from October 1965 to July 1974 as shown above. the duration is 106 month.

There are lots of opportunity in a ABCDE formation. In the 1965 to 1974 case, Wave A was -21%, Wave B +31%, Wave C -35%, Wave D +59% and Wave E -42%.

Since the current Wave A has taken a form of 5 waves, the 3-3-3-3-3 ABCDE formation is unlikely, Most probably the current Bear Market the Super Major Wave IV may take the form of ABC-X-ABC. In my post yesterday I talked about 40 months for the first ABC, allowing 12 to 15 months for wave X and another 40 plus months for the second ABC, the whole Major Wave IV can take 100 months to complete. But again, there are lots of opportunity in the ABC-X-ABC formation and the first "one in a lifetime" opportunity is approaching with the current 17 months long Wave A in its last journey (hopefully) that has dropped 51% to date.

The above chart was copied from the site "calculatedrisk.blogspot.com". It is a percentage and duration comparison of the 1929 depression(Major Wave II), 1973 oil crisis(Wave E of 4), 2000 IT bubble ( Wave iv of 3) with the current 2007 financial crisis. It did not include the ABC Wave 2 from 1937 to end of 1941. It is hard to conclude anything from the comparison because the corrective waves are from different degrees or categories.