Hemline Index And Bear Markets

People are truly hardwired to seek patterns to rationalize desired outcome/s.

And some even take a cue from evolving fashions...

According to the Daily Reckoning,

``The "Hemline Index" was first developed by technical analyst/economist George Taylor in 1926. It gained popularity around the 1929 stock market crash. The theory states that the stock market rises and falls with women's hemlines. Below is a famous graphic depicting the stock market and hemlines from 1897 to 1990 constructed by Alan Shaw's legendary technical analysis group at Smith Barney."

``If this theory still holds, the story below is a bearish indicator for the stock market."

Why so? Because today's fashion reveal of the return of "lengthy" hemlines as shown by the New York Times article

The New York Times, “There is definitely a movement to a very lengthy look, especially among the young,” said Nevena Borissova, a partner in Curve, a progressive retailer with stores in New York, Los Angeles and Miami. Ms. Borissova favors radically stretched-out skirts and dresses that “drag on the floor, with raw edges, and worn with combat boots,” she said. And as she pointed out, these myriad calf- or ankle-grazing iterations of the milelong skirt bear no relation to “Big Love” or, for that matter, the Summer of Love."

Well, I wouldn't know of anyone who would buy or sell of financial securities solely based on "fashion" trends. And I don't think people buy or sell securities because they wake up on the right/wrong side of the bed too.

This makes the above correlations more coincidental and subject to the flaws of "cognitive bias". Nevertheless, an amusing anecdote.