Chart of the Day 12/17/2010 Post Massive Bear Market Rallies


This weeks chart of the day for 12/17/2010 displays price movement and the duration of those moves in post massive bear market rallies. Based the historical data shown, it looks like we could have a few more years of choppy trading, which doesn't seem out of the question to me at all.

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. It is worth noting that the current rally just made new rally highs. However, both the 1932 Dow rally and the 2002 Nasdaq rally briefly made new highs during their flat/choppy phases.

If the current rally were to continue to follow the post-massive bear market rally pattern, the current choppy phase would continue for another 150+ trading days (i.e. 7+ months).

Chart courtesy of Chart of the Day
Chart of the Day 12/17/2010 Post Massive Bear Market Rallies

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