Chart of the Day 02/11/2011
Post Financial Crisis Retracement

Today's chart of the day below for 02/11/2011 displays "Post Financial Crisis Retracement" in several different market indices.

It seems pretty amazing to look back and see just how much of the declines have been recovered.

The stock market has shown us the disconnect that can exist, yet easily forgotten, and that can occur between the market and the economy in general.

Unemployment is still high at 9% or above in many states, housing prices are still declining-flat at best, interest rates have begun to rise, food and gasoline prices continue to rise, foreclosures are still way above normal and on and on. I could keep going, but I don't want to think about it.

In fact, one lesson to be learned here is that stocks can move higher during tough economic times and money can be made trading and investing to the long side no matter what condition the economy is in.

Some people say to be invested at all times in the market and this is a perfect example. If you had gotten out of the market due to a poor economic outlook, you could have missed the retracement since the lows in March, 2009.

Maybe the government has taken the stance of supporting/inflating the stock market to give the perception that things are going better than they are? With unemployment still way too high, maybe it's time to concentrate on job growth instead?

For some perspective on the post-financial crisis rally, today's chart illustrates how much of the downturn that occurred as a result of the financial crisis has been retraced by each of the five major stock market indexes.

For example, the Dow peaked at 14,164.53 back in October 9, 2007 and troughed at 6547.05 back on March 9, 2009. The Dow currently trades at 12,229.29 -- it has retraced 74.6% of its financial crisis bear market decline.

As today's chart illustrates, each of these five major stock market indices have retraced over 70% of their financial crisis decline. However, it is the Russell 2000 (small-cap stocks), the tech-laden Nasdaq, and the S&P 400 (mid-cap stocks) that have recouped nearly all or (in the case of the S&P 400) more than all of the losses incurred during the financial crisis.

Chart courtesy of Chart of the Day
Chart of the Day 02/11/2011 - Post Financial Crisis Retracement



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