Why It Might Be a Good Time to Revisit Ray Dalio’s 1937 Analog

Ultimately it comes down to semantics but I think there's a lot of confusion about the difference between traditional technical analysis and what a quant shop like Rentech or TwoSigma does. Quantitative strategies might use certain technical data as inputs, but it's not the same thing as drawing teacups on charts and publishing an article in Market Watch saying the world is going to collapse.

Nobody knows what RenTech is doing in the medallion fund, but I can tell you with certainty they do not have analysts drawing head-and-shoulders patterns (ie. traditional technical analysis). I think we could argue semantics here again but my point is ultimately that what this article is doing with that chart makes no sense.

I do agree that increased risk of job loss is of course bad and that recessions are bad in general, but this article is about the stock market.

I've seen that used to sell a lot of cheesy "online trading school" e-courses but I can't speak to whether that was what ultimately drove him to make the trade.

This article seems to suggest Jones got the idea from a guy named Robert R. Prechter using Elliot Wave Theory: https://www.nytimes.com/2007/10/13/business/13speculate.html

Prechter called the '87 crash using wave theory, but he also called for "the end of the great bull market" in 1995. Which was 5 years too early (ie. flat out wrong).

The lesson here is there's always somebody calling for the next collapse. When it inevitably happens each time, there's always a fresh stock of people you can point to who "called it." Whether this is genuine smarts or just random probability, is questionable.

when you keep overlaying charts, eventually, one of them will be right.

For every market event you are always going to find someone who predicted it. People predict everything at every point in time.

Getting one prediction right doesn't prove anything. Getting a lot of them right also doesn't prove anything. No one has managed to show a streak of accurate predictions unless they silently purge their incorrect ones.

Humans have a tendency to focus on the successes and ignore all the failures. It's in human nature and it's very hard to avoid it.

In unsophisticated terms, I think it's basically that you can probably play with nearly any two time series graphs and then manipulate the data such that you find correlations.

Of course, that doesn't mean there actually is any correlation.

Prices aren't stationary, which means (essentially) that they move around and compound on themselves. Correlation assumes that the two time series being correlated are stationary. If you want to correlate two price series, you do so using returns (e.g. +1%, -2%, ...), which are a stationary series. If you run a correlation on price series, you'll get silly high values like 94%.

Chanos kept his short on TSLA secret for 3.5 years.