This is just an extract from Mr.Steven. J.Williams Blog.
Over the past week, the drop in the DJIA has been so sharp that even Disney World’s ‘Tower of Terror’ ride in Orlando, FL, pales in comparison. It might make you think twice about having a large meal before braving the DJIA rollercoaster.
Taking a long-term perspective, I reference my updated 200-year chart, along with some more detailed charts of the current situation. The top chart, from CyclePro, is one of the most notable. It illustrates a 200-year history of U.S. stocks with annual Hi-Lo-Close bars adjusted for BLS inflation. On the log scale, it’s clear that stocks have remained within a consistent channel throughout history. Whenever the upper channel is touched or breached, the market eventually moves back to the lower channel, and vice versa. There’s even a higher orange line, touched only in 1929, 2000, and 2007, and a lower orange line reached in 1813 and 1982. The double touch in 1900-1906 led to a bear market until 1920, and I believe the 2000-2007 double touch may follow a similar path. My target period is actually between 2016-2018. Even the 1906 bear market initially bounced off the centerline before ultimately breaking down. I anticipate a similar scenario now, with a potential target no later than 2012 — but perhaps we’re already there…”
