“There is nothing new in the world except the history you do not know”

Harry S. Truman —

Like you, I wear a number of hats during my daily pursuits. Aside from teaching, writing, and trading, I’m also a student of history; an amateur historian, if you will. As the years roll on, my obsession with history grows. Experience breeds a greater appreciation for just how many lessons are hidden in the past.

Nowhere is this truer than on Wall Street. By studying the past behavior of the stock market, we can place modern movements in context. Consider all the questions that can be answered by even a brief study of market history.

1. What is the typical behavior of the stock market?
2. How does the current bull market compare to ones in the past?
3. How often do we see bear markets?
4. What is the average duration and length of a bull or bear market?
5. What are the long-term drivers of stock market performance?

I could go on, but I think you get the point. The answers to such questions bring context to our current market, giving us greater perspective. With that perspective, we can better anticipate and therefore better prepare for future potential outcomes.

Let me tell you another reason why I look to the past: I’m a technician schooled in the art of technical analysis. One of the core tenets passionately preached by the gatekeepers of technical analysis is that history repeats itself.

While many parrot the principle, I suspect few can articulate the reason behind it.

So allow me to unveil it for you:

Human nature.

Among the sea of changing variables, human nature stands out as the one true constant. Ever since the famous Buttonwood Agreement was struck in 1792 the twin devils Fear and Greed began their insidious work among investors. As Wall Street’s long and winding tale of booms and busts will attest, human emotion has been driving the bus since the beginning. In short, investors become way too starry-eyed and greedy at market tops while quickly diving into a pool of panic at market bottoms.

And it’s not just at market peaks or troughs that emotion manifests itself. Its influence is seen all along the way as the emotion pendulum is always in motion. Never forget when you are reading a chart you are simply analyzing the behavior of market participants.

Unless mankind discovers a magical way of stripping emotions from their internal wiring, it’s a good bet we’ll continue to see the patterns of the past repeat themselves again and again.

For those interested in investigating Wall Street lore, I have a suggestion to jump start your journey. Grab a copy of Stocks for the Long Run by Jeremy Siegel. It’s a treasure trove of insightful data on stock market history and answers every single question I posed earlier.

Financial freedom is a journey

The Tales of a Technician series is brought to you by Tackle Trading.

Sign up now and gain unfettered access to all of the quality content and powerful Scouting Reports that our Pro Members enjoy for 15-days absolutely free with no strings attached and let us show you what your trading has been missing.

# Sign up now for a 15-DAY FREE TRIAL #

Legal Disclaimer

Tackle Trading LLC (“Tackle Trading”) is providing this website and any related materials, including newsletters, blog posts, videos, social media postings and any other communications (collectively, the “Materials”) on an “as-is” basis. This means that although Tackle Trading strives to make the information accurate, thorough and current, neither Tackle Trading nor the author(s) of the Materials or the moderators guarantee or warrant the Materials or accept liability for any damage, loss or expense arising from the use of the Materials, whether based in tort, contract, or otherwise. Tackle Trading is providing the Materials for educational purposes only. We are not providing legal, accounting, or financial advisory services, and this is not a solicitation or recommendation to buy or sell any stocks, options, or other financial instruments or investments. Examples that address specific assets, stocks, options or other financial instrument transactions are for illustrative purposes only and are not intended to represent specific trades or transactions that we have conducted. In fact, for the purpose of illustration, we may use examples that are different from or contrary to transactions we have conducted or positions we hold. Furthermore, this website and any information or training herein are not intended as a solicitation for any future relationship, business or otherwise, between the users and the moderators. No express or implied warranties are being made with respect to these services and products. By using the Materials, each user agrees to indemnify and hold Tackle Trading harmless from all losses, expenses and costs, including reasonable attorneys’ fees, arising out of or resulting from user’s use of the Materials. In no event shall Tackle Trading or the author(s) or moderators be liable for any direct, special, consequential or incidental damages arising out of or related to the Materials. If this limitation on damages is not enforceable in some states, the total amount of Tackle Trading’s liability to the user or others shall not exceed the amount paid by the user for such Materials.

All investing and trading in the securities market involve a high degree of risk. Any decisions to place trades in the financial markets, including trading in stocks, options or other financial instruments, is a personal decision that should only be made after conducting thorough independent research, including a personal risk and financial assessment, and prior consultation with the user’s investment, legal, tax, and accounting advisers, to determine whether such trading or investment is appropriate for that user.