StockCharts Blogs - Don't Ignore This Chart!

Berkshire's "Flight to Safety" Breakouts (BRK/B)

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Continuing to look for "leading" technical signals that pointed to the market's recent crash.  It's always interesting to see how the country's "best" investor did.  Warren Buffet's Berkshire Hathaway had a couple of interesting jumps in its stock price during the period in question.  Comparing the percentage performance of BRK/B to $SPX, we can see two big jumps in 2007 (chart above) and one jump in 2008 (chart below).  Of course, not all jumps in BRK/B are signs of an impending crash - but these charts show that they shouldn't be ignored either.

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Gold at 700 was the Beginning of the End

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The S&P 500 Index (yellow line) hit its most recent high in early October of 2007 (red arrow).  Since then it's been all downhill.  Were there any clear warning signs before the plunge began?

It's interesting to compare $SPX to $GOLD (the red line).  After creeping upwards consistently (on a log scale chart) since early 2001, gold spiked up to 715 in mid-2006 but quickly retreated back to its normal uptrend line.  However, gold's rate-of-increase increased as soon as it crossed 700 the second time in late August (blue vertical line).  $SPX began its fall soon afterwards.

Last November $GOLD retreated back to 705 before rallying again in the face to more bad economic news.  This suggests that the 700 level is important for both stocks and gold.  $GOLD probably needs to move below 700 in order to $SPX to begin a sustained recovery.

Long-Term Log Scale Chart Provides Context ($INDU)

How bad is it?  How big was the Internet bubble?  How does the current decline compare to the 1987 crash?  It's all here in black and white (and red and blue).  On a log scale chart like this, movements of the same percentage appear to have the same height regardless of the point values.

The key take away here is that when the Internet bubble burst in 2002, the market went back to the "normal" rate of climb that it established after the crash in 1987.  The current economic crisis destroyed that trendline in mid-2008 and is therefore much more serious.