POST-MASSIVE BULL MARKETS
Taking the other side of the extremely bearish Robert Prechter view of the markets is today’s chart of the day which shows the performance of several post-massive bear market rallies:
Today’s chart illustrates rallies that followed massive bear markets. For today’s chart, a ‘massive’ bear market is defined as a decline of greater than 50%. Since the Dow’s inception in 1896, there have been only three bear markets whereby the Dow declined more than 50% (early 1930s, late 1930s until early 1940s, and during the very recent financial crisis). Today’s chart also adds the rally that followed the dot-com bust during which the Nasdaq declined 78%. The current Dow rally has followed a path that is fairly similar to that of post-massive bear market rallies. The initial surge of the current rally lasted nearly 300 trading days and has been trading flat/choppy ever since. If the current rally were to continue to follow the post-massive bear market rally pattern, the current choppy phase would continue for another 200+ trading days.
Notes:
- The market is at a critical juncture. Where we go from here may surprise you. Find out right now with the exclusive charts of Chart of the Day Plus.
Won’t surprise me.
Down 20-40% by the end of October in time for the Fed’s meeting in early November, so they can have a good reason to launch QE2 (and rob the poor US public again just before the political landscape changes and they are at risk of attack).
May sound madness, but just watch & see. It starts early next week!
Feel free to visit my blog, and thanks to Mr TPC for his work on this one, mine is not much at all, just my mad musings and a few charts!
It looks like the rally that started in 1932 brought the Dow up over 250% over the next 1,000 trading days. That is a huge increase in such a short time. Technically, this is trading days and not calendar days. It’s kind of funny that it happened during the Great Depression. It’s not an encouraging sign for our current situation. We might see a bull market for a while, but wait until Baby Boomers start selling their stocks to fund their retirement. People are raiding their 401k accounts for living expenses. The key with charts is to look at a long-term perspective over years rather than months.
Mr. Paine,
How far did the Dow drop from 1929 to 1932? Approx 88%.
How much did it drop this time round? Approx 53%.
That’s a big difference. If we rally 250% we’ll be at about 16,600. I can’t see it happening. I also agree with your macro trends, retiring baby boomers and our unfunded liabilities starting to make their appearance. The future does not look bright at all.