Sunday, April 18, 2010

Magnitude Of Rally Not In Uncharted Territory

An interesting chart published by Chart of the Day compares the current post bear market rally to similar periods that occurred in the past.

As Chart of the Day states,
"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%. One point of interest is that the current Dow rally has followed a path that is fairly similar to that of the Nasdaq rally that began in late 2002. It is also worth noting that each rally lasted from about 300 to 370 trading days and then moved into a trading range/choppy phase that lasted for a year or more. In the end, the current post-massive bear market rally is by no means atypical."
So are we entering a range bound or choppy phase in the market? Seasonal influences could impact upcoming trading as the summer months approach.

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