Bear Market Rallies

Last week the folks at Chart of the Day took a look at stock market rallies after bear markets when stocks have declined greater than 30%.

"{Last Week'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%. 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."

Link: Bear Market Rallies.

*Long ETFs related to the S&P 500 in client accounts.  Long ETFs related to the Nasdaq in client accounts and the Nasdaq 100 {QQQQ} in client and personal accounts.