There’s been a fair amount of discussion about stock market analogs in the financial blogosphere and on social media over the past few months. Traders are basically asking themselves whether the current correction is just that or is, in fact, something more… like the start of a new bear market.

The most popular bullish analog I’ve seen compares the current stock market action to the 2011 correction. And based purely on correlation, the current correction fits very well with that earlier one:

Still, there are major differences between today’s market and that one of four years ago. The most glaring of these is simply the earnings of the S&P 500. Back in 2011, the correction saw the index lose 22% from peak to trough. Earnings were also growing at a nice clip so the decline saw valuations dip to relatively depressed levels. At the lows, the p/e ratio on the index fell to 13 and change.

Today, in contrast, the peak to trough decline was only a bit more than half as deep as that earlier one was in percentage terms. Earnings are also declining today, rather than rising as they were back then. Finally the p/e ratio at the recent lows stood fully 45% higher than it did during the 2011 lows. So if investors are looking for another 100% gain over the next 36 months, as we saw after the 2011 correction, I think they’re misguided. The recent earnings trend and valuations now present major obstacles to this sort of outcome.

There are other problems with this analog including where we currently stand in the broader economic and credit cycles which will be made more apparent in looking at our next analog, which I’ve been following for some time now. I first learned of it when Ray Dalio presented it in a letter back in March of this year:

I keep coming back to Dalio’s 1937 analog: http://t.co/UHrITpucuS ‘History often rhymes.’

— Jesse Felder (@jessefelder) August 13, 2015