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Trading > Amateur Investors
Will the Dow Repeat the 1937 to 1942 Time Period
Bob Kleyla | Fri, 03/27/2009 - 4:10pm | Amateur Investors, Dow 1937-1942, Elliott Wave Theory, Elliottt Waves, historical analysis, stock commentary |
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The current Elliott Wave structure for the Dow looks very similar to that of the 1937-1938 time period as shown in the chart below. In 1938 the Dow completed a 5 Wave pattern to the downside in just over a year in which it lost 50% of its value. This was then followed by a 3 week rally in which it gained 25% for Wave 1. After Wave 1 completed the Dow dropped 12% for Wave 2 which was then followed by a 34% move higher for Wave 3. This was then followed by another 12% drop for Wave 4 before the final 5th Wave up which saw the Dow rise another 24%. Overall the Dow rallied 64% from the low of 97 to the peak of 158 in 1938 as it exhibited a nice 5 Wave pattern for completion of Wave "A" up. After Wave "A" ended this was followed by the "B" Wave down in which the Dow lost 24%. This was then followed by the "C" Wave up which gained 24% but didn't rise above the peak of Wave "A" to complete the corrective ABC pattern in late 1939. Meanwhile from late 1939 through early 1942 the Dow was in a defined downtrend in which it lost 42% of its value.
It will be interesting to see if we see the same type of pattern develop in the Dow over the next 4 years.
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