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Similarities 1971 and 2010

Start by looking at both charts. You may have to scroll down. Economic similarities between these two periods are fundamentally similar, but with entirely different sources of threat. But a threat is a threat, as bull or bear are the only two conclusions to any threat or non-threat. Technically, though, there are quite a few similarities. The numbered sentences in the next paragraph is what you should have noticed from your chart review.

1) Vector Pressure is in bullish domains in August 1971 and 2010, but it is declining in both of those years. 2) Force Vectors vacillated in bearish domains for several weeks in 1971 and 2010 before climbing above Vector Pressure. 3) The Dow aggressively crossed above bullish red curve in 1971 and appears to be moving toward same in 2010. 4) All of the aforementioned points followed a nice mid-term bull cycle of about a year long (1970 and 2009), then followed by a sharp but abbreviated bear cycle. 5) After those two cycles and climbing above bullish red, the 1971 bullish spurt fell by approximately 15%. 6) After that, the bull again regained dominance.

Here is a concern. The 2010 low point interacted with bearish yellow. As you can see, bearish yellow indeed provided resistance to bearish aggression. The 1971 low point interaction was with a heighted bearish green curve. That resulted in only a 15% bear cycle. Interactions with bearish yellow, historically, offer a much more significant bearish threat in terms of magnitude than bearish green interactions. They do not last long, but they are swift and deep.

There is one significant political difference though. 1971 was not a mid-term election, but it was a presidential pre-election year, which is the most bullish year along the U.S. election cycle. As you can see, 1971 was contrarian to historical standards and was not bullish. 2010 offers some bullish hope, as market bottoms are more common in mid-term election years. On the other hand, the August 2010 bullish spurt is more passive than the 1971 spurt. The August 2010 remains configured as a bullish spurt, but it does have room to move up another 5% before tumbling to the south again.

One final point. History sometimes repeats; sometimes not. If the stock market is not bearish next week, the Short-term Indicant will signal bull/buy but with tightened tolerances on the next bear signal. A slight shift in polling favoring lower congressional turnover could be inspirational to the bear. Also, the congressional arrogance can stimulate more irrationality ahead of the Nov 2010 election is a constant threat to the capital markets.

Economic fundamentals were different. OPEC gained tremendous power in the early 1970's. They imposed an oil embargo, hurting the U.S. and world economies. The market stock market was concerned with inflation. Current speculations suggest deflationary concerns and excessive socialistic spending by so-called free market countries.

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