Is It Possible to Wipeout 19 Years of Stock Market Gains?

I find that the story of Hurricane Florence fascinating.

Is It Possible to Wipeout 19 Years of Stock Market Gains?

I find that the story of Hurricane Florence fascinating. Although it has so far been devastating to that area, fortunately it it as a category 1/2 versus a 3/4. However, you could see that monster coming from hundreds of miles away. Why wouldn't most people prepare and leave? A man was recently interviewed along the North Carolina Coast this week and asked why he was staying. He said, "It is just a little wind and a little rain. I will be ok." I wonder if his town is under water right now? This reminds me how most people think of the stock market forgetting how dangerous investing can become. There is enough evidence to suggest that a big storm is heading this way for this market. Yet, no one seems to concerned.

I sent this out today in a letter to my clients and thought I would share it with you as well. Here is a picture of the Dow from the 1920's to today.

I think that this chart is significant. Here are some assumptions to be made about this picture of the Dow Jones over 100 years.

Long-term Trend Lines

There are three perfectly symmetrical lines that separate the Dow Jones over the last 100 years. You can't get anymore perfect than those lines. Those lines act as predictors of where the market is going. From point 1 to point 4 the market operating in the bottom half of that channel. Between point 4 the market has operated in the top of of that channel.

At each one of these lines something significant happened.

(1) The top of the Dow prior to a -86% loss.

(2) The bottom of the Dow following the -86% loss.

Points 1 and 2 determine the beginning of the two outer lines. They are probably the most significant times in stock market history.

(3) Marked the second greatest stock market crash on record - the stock market crash. It took the market 17 years to get back up to that middle line and the market crashed.

(4) Marked the beginning of the tech bubble in stocks

(5) Marked the bursting of the tech bubble in stocks and the first significant bear market period in 18 years and the first since the 401 K plan was invented

(6) Marked the ending of the financial crisis and the worst bear market since the 1929 (1) stock market bust.

(7) Today which marks thus far the longest bull market on record.

Do we go above that top line or does that top line represent yet another significant top of the stock market on a 100 year scale?

If this represents a significant top, the trip from the top blue down to the middle blue line is roughly a 45 to 50% in loss which would be in line with many different types of long term analysis and cycle analysis. A drop of that significance would erase 19 years worth of stock market gain. This is the significance of bull and bear market cycles and what most investors don't understand.

I am not saying sell everything and run for the hills. I am just saying have your plan B ready. You might need it.

Bob Brooks is host of the Prudent Money Radio Show. He writes daily at If you want to see the resources that Bob offers, you can go to If you want to inquire about his financial advisement services, email him at or call 972-386-0384 and ask for Judy.