This chart shows the broad based index from the mid-seventies until now in monthly increments. For those of a technical bent, two things stand out here. The first is that two simple moving averages, a 200 period, or about seventeen years, and a shorter 50 period, or about four years, have converged and are about to cross. Such a cross usually signals a long term decline.
The second is an emerging pattern in the price data, which is referred to in the literature as a head and shoulder pattern of a high, at the end of the dot com boom, followed by a somewhat higher high, in this case in leading up to the latest debacle and then a somewhat lower high, in this case the peaks of the previous two years. This too is often indicative of a pending long term decline. What is particularly interesting is that both of these are emerging together and are confirmed by falling volume, which is shown in the second pane of the chart.
It would be the height of folly to base predictions on charting such as this, but together with obvious deep structural problems such as the impending demise of the euro zone, historic levels of inequality and unprecedented levels of public, corporate and personal debt fueled by unprecedented interest rates, the long-term outlook is beginning to look frighteningly uncertain.
Indeed, I have believed for some time that much of the developed world is following the Japanese example with a generational lag. If this is the case, then we may be entering a very long period of deflationary decline -- a sort of semi-permanent state of stagnation, with obviously disturbing social and political implications.
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