Decades ago, I read a book titled How To Lie With Statistics, and I was reminded of that book when presented with the graph below, posted at Zero Hedge and titled Party Like it’s 1999?
The graph is intended to draw a similarity between the current S&P run-up and the Nasdaq run-up and ensuing crash. A scary coincidence that makes you want to sell right now? Or someone who’s fairly adept with charts pulling a visual fraud?
Have you caught the Big Lie yet? You see, the move from 1250 to near 1600 on the S&P is about 28%. In comparison, the Nasdaq move took it from about 1500 to 4500, a 200% increase. You can easily take any move in the market and with a bit of manipulation, create a chart as you see above. The key in this case is the two different scales, the S&P on the left, Nasdaq on the right. Had the charts been produced using the same scale, they’d show no resemblance to each other.
I’m not making any prediction where the market is heading, only suggesting that when you see a chart, any chart, look carefully at the scales, and don’t let the author fool you.