"Be Bright", reads the mantra displayed on street cars and buses throughout the world this spring. And bright the world is. Neon orange dresses, saturated red jeans and bright blue shirts populate the urban landscape, implying, according to Robert Prechter's 1985 essay, "Popular Culture and the Stock Market", an underlying optimism in social mood. Expanding on George Taylor and Ralph Rotnem's famous 'hemline indicator'--that women's hemlines rise with stock prices--Prechter argues that fashion trends, along with popular music and political behavior, can be correlated to activity in the stock market, and, hence, be used to predict future moves.
Skirt heights rose to mini-skirt brevity in the 1920s and the 1960s, peaking with stock prices both times. Floor length fashions appeared in the 1930s and the 1970s (The Maxi), bottoming with stock prices. This is not likely a frivolous observation. In my judgement, it is not unreasonable to hypothesize that a rise in both hemlines and stock prices reflect a general increase in friskiness and daring among the population, and a decline in both, a decrease. Because skirt lengths have limits (the floor and the upper thigh, respectively), the reaching of a limit would imply that a maximum positive or negative mood had been achieved.
Similar changes appear in fashion colors. Bright colors are associated with market tops and dull dark colors with market bottoms. It is not coincidence, then, that, generally speaking, the smaller the skirt or the swimsuit, the brighter the color(s). Floor length fashions, in turn, are more often associated with dull dark colors such as brown black and grey.
In 2012, Business Insider created its own Hemline Indicator Index, through a "full analysis" of hemlines for New York Fashion Week, "measuring some 2,092 images from 25 designers, comparing year-on-year changes in the length of skirts and dresses." Fascinatingly, their results showed that hemlines had, in fact, been shortening, confirming—in this instance--Prechter's theory that bright colors and shorter hemlines coincide.
Further evidence for Prechter's thesis is provided by popular music, in which negative messages and feelings tend to correlate with a topping out and decline in the market.
The first #1 hit by the Rolling Stones appeared in June1965, the exact month of the low that preceded the final run to a new high in stocks... In 1966, The Rolling Stones suddenly outdid The Beatles in the number of Top Ten hits, with themes of drugs, mental breakdown, crying and death, with their final hit of the year coming in October. Look at the crash in stock prices from January to October 1966, and see how precisely it reflected the new mass mood.
At the 2012 Grammy Awards, Adele, who sings melancholic songs of unrequited love and failed relationships, won six awards, a feat outdone only by Michael Jackson, who won eight in one year.
And so, it would seem Prechter's cultural indicators of mass mood would argue that the market should be forming a top, particularly since the brightness in color appears to be at an extreme, often times reaching neon pitched saturation. So far, the chart of the Dow Jones Industrial Average appears to be bearing this out. The strong rally that started in January began to show signs of weakness in middle of March, when it reached a high of 13,252, and has since fallen 5.5% to 12,496 as of May 23. Should the market rollover in the coming months, one could only be impressed.