Recent stock market behaviour mirrors that of 1929

Remember what happened about 80 years ago? The 1929 stock market crash is famous as it marked the start of the Great Depression which lasted nearly 10 years. Many think this was the biggest crash of all time... See the following chart (taken from http://stevekoerber.wordpress.com).



What happened from 1929 to 1932 was a very deep bear market. However, within that secular bear market, we saw many massive rallies.

If we compare to what has happened recently in the Dow and the TSX Composite, it seems to be mirroring exactly the chart of 1929. Take a look at this Dow Chart...



A more than 50% drop from the highs to the March lows!!! Followed by a 50% rally which ended last week. In the past few days the Dow and the TSX have been pulling back sharply. Is the 50% rally from March simply a bear market rally? One of many to come in a possible secular bear market? Unemployment is still rising in the US and the US Government is in unimaginable amounts of dept!

If we continue to mimic the 1929-1932 stock chart, the next stop on the Dow will be in the 6500-7000 range within a few months from now.

Be very careful here. I would advise buying some very defensive plays and hedging against possible downturns.

Mercator Minerals, Ltd. (ML:TO)

I've written about Mercator before when it was in the 2.40 range. Now we stand at the 2.90 range looking for a breakout here. If Mercator can break through the 2.96 level and stay above that, I see the stock breaking out well above the 3.00 mark. See the chart below for more details:



Notice that the uptrend outlined in red is still in good shape. We bounced off it a few days ago which was an extremely good buying opportunity. Anytime we get close to that red trend line, I suggest picking up more shares. The short downtrend outlined in pink was violated yesterday with the nice little upward move. Now if we can break above that previous black hammer candle and close above it, we are in position to move much higher. This one is looking very bullish right now. Watch it closely!