The current shock in the stock market made me wonder where are we in terms of previous crashes. So I went to http://www.tradingview.com and pulled up the chart of DJI (Dow Jones Index). DJI has data from 1914, more than a century worth of data is a good place to start. Going over the years few notable crashes popped up:-
- 1929 – Great Depression
- 1987 – Crash
- 2008 – Great Recession
- 2020 – Corona crash
Spanish Flu happened after World War 1 (1918-1919) and DJI went up. But to note, DJI had a selloff during World War 1.
Let’s dissect the current crash. From Feb High to March Low we are down (38.46 %) in Dow. Other averages fared similarly. On the time frame of my investigation, the initial drops are:-
- 1929 – (49.47 %)
- 1987 – (41.15 %)
- 2008 – (18.05 %)
Bounce
What happened next in all the cases, we saw a bounce of at least 50% of this fall. In 1987, we saw 100% + recovery and no downside follow-through after the Black Monday.
50% of the bounce leads to Dow 24000 in the current scenario in the next 3-6 months.
Current Month
After a deep fall and recover, it is seen in all cases that DJI did a sympathy slide, in most cases not making new lows (except in 1929). The bounce starts after this sympathy slide month.
What to Expect
Expect April to be red/inside month and come near to Mar lows. May can stage a recovery which can last a few months.
Here are the charts
1929 – Great Depression
1987 – Black Monday Crash
2008 – Great Recession
2020 – Corona Crash
