Saturday, 11 April 2009

How Bear Markets End



Posted April 7, 2009 05:15 PM (EST)

How Bear Markets End


Doug Short has taken a detailed look at the 10 bear markets and bear-market-recoveries since 1950. You can click through a slideshow showing each of these periods in detail here >


Importantly, Doug's charts do not include the horrific bear market of 1929-1932, which puts all of the post-war ones to shame. To get a more detailed sense of how that one "bottomed," click through to the last slide, which overlays our current bear market on top of the three nastiest ones in the last century.


Some key points:


* The 10 bear markets since 1950 have bottomed down 20% to 57% (the low in the current cycle) off the peak. The current bear is by far the worst since the Great Crash, which bottomed down 89%.


* The bear phases of these markets lasted from 3 - 30 months (we're currently in month 17). The drop from 1929-1932 was also about 30 months.


* Most of these markets offered some sort of "retest" of the low. Importantly, however, some did not. (As always, beware confident "technical" analysts)


* As this additional chart shows, the S&P is now trading about in-line with its long-term price trend after 15 years of trading above it. So even if we have put in the bear-market bottom, it is likely that the S&P will eventually trade below trend for a considerable period of time.



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