The Shape of Market Bubbles.

In my recent reviews of major worlds markets, I included a chart of the amazing bubble in the Shanghai Composite Index. In this post we’ll build an overlay of four major bubbles across market history to see the variety of shapes a bubble can take. But first let’s take a long view of the index. Incidentally, the index’s latest close was 2586.21. So a fall to the area Guppy mentioned is about a 10% correction from this point.In my recent reviews of major worlds markets, I included a chart of the amazing bubble in the Shanghai Composite Index. In this post we’ll build an overlay of four major bubbles across market history to see the variety of shapes a bubble can take. But first let’s take a long view of the index. Incidentally, the index’s latest close was 2586.21. So a fall to the area Guppy mentioned is about a 10% correction from this point.

The next chart centers the Shanghai Composite. The peak is the center of a 3000-market day timeline. Markets are open approximately 250 days per year, so this is a snapshot of a little over eight-and-a-half years with plenty of room left to track the future behavior. The dramatic rise took place over about one year with a dramatic collapse of about the same duration. The symmetry of this these two years is astonishing and, as we’ll see, not necessarily characteristic of bubbles.

Now we’ll add the Nasdaq Tech Bubble. The Nasdaq was a bit less aggressive in the early stages of bubble formation, but the collapses are remarkably similar.