21 March 2010

Chart of the Day: Stock market rallies

Chart Of The Day The published an interesting chart providing some historical perspective to stock market rallies.

The current Dow rally that began just over one year ago can be classified as both short in duration and below average in magnitude: most major rallies (73%) resulted in a gain of between 30% and 150% and lasted between 200 and 800 trading days has entered the low range of a "typical" rally and would currently.

The question often asked is whether this is a bull rally in a bear trend or a secular bull market. The definition a bear market is probably more important: in my opinion, and I agree with David Fuller, it is a contraction in valuations; this contraction does not mean that the stock market must fall, it may just trade in a range for an extended period of time or grow very slowly, and well-below historical average.