Misuse of Charts

Pet peeve alert.  I noted in one of my first posts, here, that I really hate it when people take 2 data series, use different scales for the Y axis (and sometime the X axis also!!), overlay the graphs, and then say, “holy cow, look what happened before!  That’s going to happen next, again!”

And now everyone is freaking out about the latest graph, comparing today’s DJIA with the 1929 DJIA.  Here’s the graph, from Tom McClellan’s post here, dated November 27, 2013:

And here is the current update, this article from Mark Hulbert at MarketWatch dated 2/11/14 (using updated graph from McClellan):

Cullen Roche has a calmer commentary (2/12/14) on the chart.

If you read all the posts, they don’t really say that, but just looking at the charts, it is certainly implied.

I don’t disagree that the stock markets appear to be overvalued, pretty much by any measure (see Hussman), and our current bull run seems to have continued as long or longer than historical averages.  So all those facts would also seem to imply that we should expect a market drop sooner rather than later.

They could at least mark the full moons on the charts.  Or Fed meetings/announcements.

Update 2/18/14:  I’m not the only one who had this thought.  Here’s a chart from Business Insider, scaled to percentage:

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