Act Two, Part 2.

Sunday, Jan 06 2019 by
4

January 5, 2019

Having established the trend in Act Two, Part 1, let us now look at the detailed data behind the charts in that blog. One thing to keep in mind is that the market from 1962 to today was measured using S&P 500 data from Finance.Yahoo.com. This data has daily highs and lows so market tops and bottoms could be measured using intraday highs and lows. By contrast, market data from 1962 and before used Dow Jones Industrial Index data accessed from Wharton Research Data Services[1], which only provides daily closes. Therefore, highs and lows refer to closing and not intraday highs and lows and as a result, will show much lower volatility than otherwise. 

The table below summarizes the data for the first bottom and top - a point that marks the beginning of Act Two. As can be seen, all but one market bottomed initially between trading days 27-35. The only exception was the 1987 bear market. This was a market in a hurry and would be back to par 438 trading days later - a year and eight months. It bottomed initially on day 12 with a whopping 34.2% loss and recovered quickly the next day for a 19.8% gain from the previous day's low. Taking out that outlier, the average first bottom came at 30.9 trading days, while the average first top came 8.4 trading days later. The average first loss was 12.4 percent without the 1987 data and gave rise to a gain from the bottom of 6.3%. Our own market lines up fairly well with the major bear market data. It bottomed initially 26 trading days after its September 21 S&P 500 highpoint of 2940.91. It peaked seven days later with an 8.1% gain from the bottom. 

 

Bear Market

Days to 1st Bottom

Percent Loss

Days to 1st Top

Percent Gain from Bottom

1937

28

22.2

31

5.0

1946

31

7.3

45

4.7

1962

32

10.8

34

5.0

1968

27

10.8

36

5.4

1973

35

10.1

42

5.6

1987

12

34.2

13

19.8

2000

32

14.7

45

10.2

2007

31

10.8

42

8.4

Average*

30.9

12.4

39.3

6.3

Today's

26

11.5

33

8.1

*1987 not included


All major bear markets went through two additional short recoveries or "dead cat bounces" in the first 151trading days. The two tables below summarize the data for these…

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2 Posts on this Thread show/hide all

aflash 8th Jan 1 of 2

This is an excellent road map.

As events unfold the Treasuries and Dollar have come off, parly due to the Fed softening its rate-rise rant but Gold and Oil also seem to have run their short term course. Equities reaching resistance levels, except maybe for transports, perceived slow-down coming.

All temporary stuff.

What concerns us all is the possibility of serious loss of value à la façon de la Financial and Dot.com busts.

An excellent piece of research by bill@technicaltrader.uk concluded that the approximate 20% drop level acts as Support first and then as Resistance prior to 35-50% drops.

Called 'some thoughts on Bear Markets from a technical perspective', he might have a copy for you although it dates from Feb 2016. I would post it but the charts do not work here. E-mail him or private message me and we can take it further.

 Bonne chance.

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dejekarl 9th Jan 2 of 2

Thanks, Aflash. That sounds like an interesting read. I would be relieved to find a drop of 35-50%. Sadly, my own research indicates at least 50% although lower would sure be better.

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