aaron evans

I have no training in economics so please take my statements about the economy with a grain of salt. The market is re-testing its lows with the DOW nearing the 7300 mark. The big banks saw ~20% losses during trading on Friday as investors seemed to acknoweldge that these banks are likely to be nationalized.

With the DOW down 45% from its high it would seem that we’re nearing in on some sort of bottom. Unfortunately, I’m not so optimistic. I came across two charts that paint a gloomy picture of where a bottom is in the market.

The first shows the SP 500 since 1960:

If you take a swag at fitting a linear curve to that graph it seems pretty reasonable to see the SP 500 as low as 500 (it’s 770 as I write this).

A similar chart compares the DOW/Gold ratio since 1980:

The ratio today is about 7 and I’ve heard predictions of it dropping to as low as 2 less. Consider DOW 5400 and gold at $2700/ounce. Seems as absurd as a 7200 DOW sounded a year ago.

This entry was posted on Sunday, February 22nd, 2009 at 4:17 pm and is filed under Economy. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.