Frightening chart comparing 1929 market to present shakes up experts

A chart comparing today’s Dow Jones Industrial Average numbers to those during the days leading up to the 1929 stock market crash offers some frightening parallels that suggest we may be on the cusp of another crash.

The chart came courtesy of the McClellan Market Report’s Tom McClellan, who gives credit for the revelations to Tom DeMark, a technical analyst and founder and CEO of DeMark Analytics, according to MarketWatch. MarketWatch is a member of the Dow Jones & Co. family of financial publications that includes Barron’s and The Wall Street Journal.

Image credit: MarketWatch

DeMark said he first compared current market activity with the 1928-1929 period well before it began attracting notice in November.

“Originally, I drew it for entertainment purposes only,” he told MarketWatch????. “Now, it’s evolved into something more serious.”

McClellan cautioned against arriving at exact parallels between the days leading up to the crash of 1929 and how the market will react in the near future. Nonetheless, the similarities are so striking that they make the hair on the back of your head stand at attention.

“Every pattern analog I have ever studied breaks correlation eventually, and often at the point when I am most counting on it to continue working,” McClellan said, according to MarketWatch. “So there is no guarantee that the market has to continue following through with every step of the 1929 pattern. But between now and May 2014, there is plenty of reason for caution.”

Other financial indicators have been dismal, too. The White House has been repeating for years that the country is on the road to recovery, despite evidence to the contrary.

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Although unemployment is at its lowest in years, the drop came at the expense of participation. Full-time, gainful employment has been replaced by part-time employment, coupled with a mass exodus from the job market. As a result, the United States is at its lowest labor participation rate since the Carter administration.

Growth in gross domestic product has ranged from anemic at worst to sluggish at best for the last five years.

Congress and the White House are on a spending spree that shows no sign of letting up. As a result, the national debt has exploded by more than 50 percent of what it was when President Obama took office.

Standard & Poor’s downgraded the U.S. government’s credit for the first time ever, from AAA to AA+, on Aug. 5, 2011. The world’s other major credit reporting agencies soon followed suit.

Throughout all this turmoil, the country’s single financial bright spot has been the stock market. Could even that last amid the chaos?


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