Ok here is one to scare anyone who is still sober on a Friday night. Take a look at the two screen shots of charts above (Click on images for a larger picture). The first one shows the extent of the retrace that took place after the crap out in 1929 (just over 50%) and the second one is what has happened since the peak in 2007. As you can see we have retraced just over 50% again.
I appreciate that the two moves took place over different lengths of time but the patterns are very similar and also relate to two very similar periods of market excess.
For what it's worth I am in the large correction downwards camp and cannot rule out a break of the low. If an industrialised government bond issuer defaults (Japan), anything can happen. Bond yields don't need to rise too far there for the entire tax receipts to be exhausted paying interest on outstanding debt. Scary. I'm sorry to bring it up on a Friday night! In any case it may not even be a top yet but still interesting...
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