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Written by and copyright © 2005-2011 by Thomas N. Bulkowski. All rights reserved.
Below is a review of what is termed the crash of 1929 from a technical analysis
perspective.
I show the chart full size because when I reduced it, it looked like...well...terrible. So you
will have to maneuver up and down. Sorry about that.
A broadening top appeared in early 1929,
but this did not have bearish implications. In fact,
the partial decline at point
A was bullish. The Dow broke out upward
from the chart pattern, leading to the peak at B.
Look at the inset, the blue box. This is on the daily scale while the rest of the chart
appears on the weekly scale. The head-and-shoulders
top chart pattern is obvious even though
the shoulders are a bit muted. They remind me of a big chicken with small wings. Anyway, the
head-and-shoulders top, when confirmed by price piercing the neckline
(F) or closing below the right
shoulder low (red dashed arrow), suggested the market was going
down.
And down it went. The drop from B to
C took the index from a high of 386.10 on September 3 to a low of
195.35 on November 13. That is a drop of 49% in just over two months. But that was just the
start of the decline.
A pipe bottom signaled a recovery
until mid April when the Dow turned down again
(D). The decline was not a straight-line run, but on this
scale, that did not matter much. A descending
scallop broke out downward, suggesting additional
declines. A second pipe bottom indicated a recovery, but it did not last long.
The index bottomed in July 1933 at a low of 40.56. From the peak at
B to the low at E, the Dow dropped
an astounding 89%! The crash of 1929 was quick and severe, but the bear market that followed
made things much worse.
Not shown in the above chart, but once the decline finished, the Dow doubled in two months
and formed a high and tight flag
that never confirmed. The Dow dropped back and formed an
ugly double bottom and then began a long recovery.
-- Thomas Bulkowski
Copyright © 2005-2011 by Thomas N. Bulkowski. All rights reserved. Everybody lies, but it doesn't matter because no one listens.
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