By now you’ve probably seen that “scary” market chart that compares today’s market to that of 1929. The chart, produced by Tom McClellan of the McClellan Market Report, shows market movement from July 2012 to today, overlayed on a chart of the market for the months before October 1929. The eerie similarities seem to predict a 1929 style crash to occur in March or April.
In looking at the picture, it would be hard to argue with that conclusion. The two parallels are uncanny and include — you guessed it — a pullback in the market similar to what we just witnessed followed by a brief spike higher.
Then it’s down she goes and down she goes hard!
I’m reluctant to take this chart too seriously, but considering the parallels continued after I first saw it in November, it is a bit spooky.
Rationally speaking there is nothing about today that is remotely similar to 1929. We have more transparency, liquidity, and regulations in place to protect against a crash similar to what transpired then.
But, you can’t argue with the chart.
Or can you?
I can make up a chart to look pretty much like anything I want it to look like. To draw conclusions from such fanciful artwork would be foolhardy.
Even understanding the nonsensical nature of comparing today to 1929, I can’t help to be a bit concerned.
I won’t go nuts suggesting everyone pull out of all stock positions and put the cash in mattresses, but I will say that it is always a good idea to shed your portfolio of stocks that are overvalued.
On the following pages are 3 stocks I would jettison immediately before we are hit by a 1929-style crash.