This chart was created by Jean-Paul Rodrigue
- Hofstra University and provides a
visualization of an asset bubble and the lifecycle of it, or let’s call
it the DNA. Every asset bubble resembles this chart. Superimpose it on market
tops like the Nasdaq, the Dow, oil, or any other
asset that severely went POP and you can see the relationship to the DNA
model shown in the chart.
Insert your asset and your relative time frame and
try to use it wisely. Think very closely, is there any asset at the current
moment that comes close to resembling this chart? Using it wisely and
spotting the trends and market moves and hedging accordingly can help you in
the long run. The chart tells us that any asset that truly is victim of a
bubble pop must retrace all the gains accumulated during the smart money phase
before the price returns to the mean.