DJIA: A Trip Down Memory Lane
OT Signals | Aug 02, 2014 11:29AM ET
Since Argentina’s default on its bond obligations and the collapse of Banco Espirito Santo (LISBON:BES) are credited with triggering the global market sell-off which started on July 31st, it is worth taking a trip down memory lane and looking at two historical charts coinciding with two previous international financial crisis events which occurred during this time of year. This takes us back to the Asian financial crisis which started in July of ’97, and the Russian (or Ruble) financial crisis which was triggered in August ’98.
As the weekly charts below show, the ’97 crisis lead to a 13 week long 16% decline in the DJIA, which was over by November of that year:
While the ’98 crisis was accompanied with a 20% drop, which ended in October ‘98:
Therefore, if history is any indication, investors shouldn’t rush to buy the dip at this time. A decline of similar proportion should lead to a retest of the ’07 DJIA highs at around 14,000. The tapering of QE and widespread geopolitical and financial trouble may add more fuel to the fire.
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