O'Neil Thinks This is a Replay of 1938

Here is a chart of the Dow Jones in the 1937-1938 Crash. I am posting this, because William O’Neil says that this Bear Market looks exactly like that Bear Market.
Below is a chart of the Dow Jones from Mid-2008 – Present.
The charts look similar, because human psychology is a constant. Fear and Greed run to quantifiable extremes and that is why charting stocks works.
We appear to be in that April – May 1938 timeframe, when the initial bounce off the Bear Market low runs out of gas.
The most important part of these charts is how in June 1938, massive volume showed up (2). That is how you know the Big Boys are in for real. I expect something similar to occur in the next few months, where the markets pull back into support, sit around and then take off on big volume.
I already know the areas I think will lead and I am starting to build positions, with tight stops.

Here are charts comparing the Dow Jones from 1920 – 1937, the NASDAQ from 1990 – Present and the Nikki from 1984 - 2003. They are essentially the same chart – illustrating extreme greed and the many years of non-productive trading. Does anybody still think “Buy and Hold” is going to fund their retirement?

For numbers dorks like me, the Dow hit its 1938 low 102 months after its 1929 high. The NASDAQ hit its 2009 low (so far?) 104 months after its 2000 high. It is going to take time to repair…

If the markets are indeed replaying the 1938 rally, then we are looking at some really nasty trading in 2010-2014. But remember, that Bernanke has said on several occasion that his goal with all of this cheap liquidity is to replicate the 1933 – 1937 Bull Market.

Maybe we are merely replaying the 1970s – an era of high Taxes and rising Inflation, Interest Rates and Commodity prices. That was a choppy, nasty time to own stocks.

The moral to all of this is that you are going to need to be as good at protecting money as you are at growing money for the foreseeable future.