"Two
Ghosts from the Past"
by Barry Arnold, editor
The Primary Trend
"On
what has been a terrible, terrible day; a day when so many innocent
people perished so needlessly and the rest of us stared, transfixed,
at the stream of horrible, never-to-be-forgotten images on our
television screens (just as we did during the long-ago November
in 1963), I will confine myself to quickly commenting on two
past precedents; one bullish, one bearish.
"Pearl Harbor.
The Dow sold off 6.6% during the next two days, then fell another
17% by April 1942, at the Battle of Midway low. The market never
got that low again, and more than doubled during the next four
years.
"The Kennedy Assassination.
The Dow sold off 3% from the time the first news flash hit the
wires Friday afternoon until the exchange closed at 2:07. It
remained closed the following Monday for the funeral; when it
reopened on Tuesday, the Dow retraced its entire loss almost
from the opening, then staged a straight-line 35% advance during
the next year-and-a-half.
"So there you
are; two precedents. One bullish, one bearish.
"You be the judge."
Walter Deemer
Walter Deemer's Market Strategies and Insights
September 11, 2001
Below,
we feature charts of the Dow Jones Industrial Average during
the two historical events in order to visually capture the longer-term
ramifications on the financial markets. The September 11th attack
on the U.S. is compared to both the Japanese attack on Pearl
Harbor and the assassination of President John F. Kennedy because
all three are non-financial crises that had the potential to
wreak havoc on Wall Street.
The Kennedy
Assassination was not a "call to arms" Pearl Harbor
was. Today's terrorist attack most certainly has the U.S. and
its NATO allies mobilizing quickly.While the assassination of President Kennedy buckled the knees of the equity markets for one day, it occurred in the midst of a bull market. The overriding strength of the early 1960's bull market subsequently shrugged off this tragic news. Both Pearl Harbor and today's events occurred in the midst of a bear market.
Technically, the Dow Jones Industrial Average made a new fake-out low in 1942 prior to launching its new four-year bull market. We feel that DJIA could make a similar about face in 2001 if it breaks below 9100.
History never repeats according to an exact script, but history has proven more often than not that crisis = opportunity. If we can look beyond near-term volatility, 2001 should be no different.
Editor's Note: Barry Arnold is editor of The Primary Trend, 700 North Water St., Milwaukee, WI 53202, 1 year, 12 issues, $80.
