Reply #1: Market Observation

[ozymandius]

Yesterday Once More
BY BRIAN PRETTI

As you know, the mainstream financial media has been literally falling all over themselves quoting equity market performance since the March lows of last year. And of course the numbers are virtually magical. Once in a lifetime. Every investors dream, right? Of course this occurred after an every investors nightmare prior few years. The point is that although 2009 was indeed a year of extremes in terms of the early year plunge and then record setting rally, performance of the S&P and the Dow did not even measure up to the initial rally year of 2003 in the prior economic/equity cycle. But one thing is true though, 2003 and 2009 looked very similar in terms of the rhythm of human decision-making. Although no one knows what lies ahead, I always like to look back at historical patterns of human decision making for potential clues as to what might lie ahead. Especially when so few expect such an outcome. Let’s have a little visual look that you may already know all too well. It’s a look at the 2003 equity market experience as compared with 2009 using the SPX as a proxy for equities in aggregate. We’ve tacked on 2004 experience for compare/contrast purposes. The numbers are current through Wednesday of this week. ....

Additionally, if there is one other truism in investing, it’s that human behavior and decision making repeat. They rhyme in rhythmic patterns throughout market history. As Jesse Livermore suggested to us long before we were born, “human decision making never changes, only the wallets do". So it just might have been that a different set of wallets were doing the driving in 2009, but the decision making behavior looks like a dead ringer for what played out in 2003. And although this may seem a bit Twilight Zone-ish, the S&P last year closed 3 points higher than it’s 2003 close. The Dow was 24 points higher. In other words equities closed 2009 almost exactly where they stood at YE 2003. The rhythmic decision-making was so similar, it virtually cries out for analytical comparison.

http://www.financialsense.com/Market/wrapup.htm