With this in mind we look closely this week at previous bear markets to see which, if any, warning signs cropped up before in technical pictures; learning from the ghosts of panics past to spot the prospect of new spectres and scares.
We kick off with a daily chart of the Dow Jones Industrial Average between June and December 1987. The summer's grudging rally slowed late August and formed a very gentle rounded top. October the 4th saw the biggest daily fall so far that year, called a bearish engulfing candle as it overlaps the range of several previous days. The mid-month drop below 2,400, a chart support level since mid-June, was the next technical signal that the mood had changed, leading to another big loss the following day. By now the penny had dropped and an enormous opening gap lower saw implied volatility soar to almost 50 per cent and the highest since 1974. The bulk of the losses occurred over just four consecutive days - certainly a short sharp shock - ending the year 27 per cent below the peak until then.
The quarterly chart of the FTSE 100 index reminds us of previous struggles in the 7,000 area. Halving between 2000 and 2003, and again in 2008-09, this year's been different as, despite the sharp drop into the first quarter of 2016, the index is back at a record high. Certainly not out of the woods and only a quarterly close well above 7,000 would relieve the sense of unease at current prices.
Japan's Nikkei 225 index is another salutary lesson in bubbles deflating. A practically vertical ascent since global stock markets started rallying in 1982, more than quadrupling along the way, the first warning the chart gave you were eight consecutive bull quarters post the fourth quarter of 1987 towards the record high at 38,950. Overstretched, the next massive red flag was again a bearish engulfing candle in the first quarter of 1990, ending the year off almost 35 per cent. Since then repeated and significant rallies haven't managed to get even close to peak, a low at 6,995 posted in the third quarter of 2008. A bitter pill to swallow.
And to remind that sudden lurches are possibilities all over the world, we look at Saudi Arabia's Tadawul All-Share Index. The weekly chart shows the phenomenal gains in 2005 and, at the time, robed men would congregate over coffee at their stockbroker's offices, congratulating themselves on how clever they'd been spotting the latest must-have share. From 7,866 to a record high 20,966 in 12 months, an increase of 1.66 times the starting point - and too many sixes for a slightly superstitious trader. Again the slide started with a bearish engulfing weekly candle, the work of five months undone in just three weeks. A subsequent fall in the second quarter of 2006 also started with a bearish engulfing candle and took the index all the way back to our starting point; bad luck really. In case you're wondering, it stands at 5,785 today.
