History is hard to avoid. No matter how much or how little of it you know, it can be used against you for all sorts of mistakes. Some say that you're doomed to repeat the history you forget, while others claim that remembering history too well makes you the general fighting the last war.
And one cliché too many may be what led Henry Ford to say, "History is more or less bunk."
Market analysis is a venture in which historical studies have a clear practical value -- namely, as a tool that you can use well, badly, or not at all. Not at all is better than badly, but history done well usually produces market analysis done well. Patterns and situations from the past can indeed be relevant to the present. What's more, similarities and differences can be equally instructive.
For example, consider Japan's Nikkei from 1989 and the NASDAQ index since 2000.
From the end of 1989 through 1991, the Nikkei fell 65%; from March 2000 through October 2002, the NASDAQ fell 80%. This big decline in the NASDAQ led lots of analysts to see an analogy between the two indexes, but the real show-stopper would have been to anticipate the analogy beforehand -- something like this:
"Such analogies rarely work to perfection, but given the striking replication of a year-long trading pattern, this one bears watching."
EWFF, January 2000
That's right. The Elliott Wave Financial Forecast had seen the similarity beforehand, in that the NASDAQ's manic rise in 1999 resembled the manic stage of the Nikkei's rise in 1989.
And yes, there is more. In May 2000, just two months after the NASDAQ's all-time peak, EWFF said this:
"Try telling a 'NASDAQ maniac' that his beloved index is higher now than it will be in 2010. The disbelief that this suggestion inspires is one good reason to suspect that the Nikkei’s ... path may be a best-case scenario for the NASDAQ."
That's a short version of the history. As for the present, the screaming question is, Is the NASDAQ still following the Nikkei's lead after all these years?
This question and its answer are important enough for an in-depth analysis in the just published June issue of EWFF -- including a comparative chart of the Japanese and U.S. government responses, created by none other than an official from the Bank of Japan.