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Sunday, February 20, 2011 4:18:28 PM
Amateur Investors Weekend Stock Market Analysis (2/19/11)
http://www.amateur-investor.net/Weekend_Market_Analysis_Feb_19_11.htm
Since March 2009 the Dow has rallied 92% in just under 2 years. By comparison it took "5" years for the Dow to rally 97% from late 2002 through late 2007. Going back to 1896 there have been other occurrences in which the Dow has made similar impressive rallies in a short period of time (2 years or less) after previously undergoing a substantial sell off (points A to B).
Meanwhile looking at the last 50 years there hasn't been a previous period in which the Dow has gained over 90% in "2" years or less after undergoing a substantial sell off (25% or more). The last closest event was in the mid 1970's in which the Dow rallied 80% following a 47% sell off. As I have mentioned before this was then followed by a 28% correction as the Dow went through a "7" year consolidation period in which it went nowhere before breaking out in 1983.
Meanwhile going back to the 1930's extreme volatility followed the 1929 to 1932 market crash in which the Dow lost 89% of its value. After bottoming in July of 1932 the Dow rallied 100% in 3 months which was then followed by a 39% correction. This was then followed by a 120% rally in 6 months which was followed by a 25% pullback. Meanwhile this was followed by a 132% rally over the next 2 years which was then followed by a sharp 50% correction in the late 1930's.
Next going back even further to the early 1900's notice there were a series of sharp moves in both directions over a very short period of time from 1904 through 1922. During this period of time rallies ranged from 87% to 143% which were followed by corrections ranging from 40% to 49%.
What these charts show is that sharp oversold rallies have occurred in the past in a short period of time following significant corrections however most of us including professional Money Managers have never experienced one until now. Also as these charts showed significant corrections or consolidation periods followed each event as well so don't expect a repeat of what occurred from 1983 through 1999 in which the Dow went straight up and gained over 1400% except for the mini crash in 1987. Furthermore a similar move occurred from 1942 through 1965 as the Dow gained 1000% which was followed by 17 years of volatility. Also prior to the Bull Market run from 1922 through 1929 the Dow went through a 17 year period of volatility as well. Thus if history repeats itself the market will remain volatile for several more years and once this latest sharp oversold rally does peak it will likely be followed by another substantial correction or an extended consolidation period.
http://www.amateur-investor.net/Weekend_Market_Analysis_Feb_19_11.htm
Since March 2009 the Dow has rallied 92% in just under 2 years. By comparison it took "5" years for the Dow to rally 97% from late 2002 through late 2007. Going back to 1896 there have been other occurrences in which the Dow has made similar impressive rallies in a short period of time (2 years or less) after previously undergoing a substantial sell off (points A to B).
Meanwhile looking at the last 50 years there hasn't been a previous period in which the Dow has gained over 90% in "2" years or less after undergoing a substantial sell off (25% or more). The last closest event was in the mid 1970's in which the Dow rallied 80% following a 47% sell off. As I have mentioned before this was then followed by a 28% correction as the Dow went through a "7" year consolidation period in which it went nowhere before breaking out in 1983.
Meanwhile going back to the 1930's extreme volatility followed the 1929 to 1932 market crash in which the Dow lost 89% of its value. After bottoming in July of 1932 the Dow rallied 100% in 3 months which was then followed by a 39% correction. This was then followed by a 120% rally in 6 months which was followed by a 25% pullback. Meanwhile this was followed by a 132% rally over the next 2 years which was then followed by a sharp 50% correction in the late 1930's.
Next going back even further to the early 1900's notice there were a series of sharp moves in both directions over a very short period of time from 1904 through 1922. During this period of time rallies ranged from 87% to 143% which were followed by corrections ranging from 40% to 49%.
What these charts show is that sharp oversold rallies have occurred in the past in a short period of time following significant corrections however most of us including professional Money Managers have never experienced one until now. Also as these charts showed significant corrections or consolidation periods followed each event as well so don't expect a repeat of what occurred from 1983 through 1999 in which the Dow went straight up and gained over 1400% except for the mini crash in 1987. Furthermore a similar move occurred from 1942 through 1965 as the Dow gained 1000% which was followed by 17 years of volatility. Also prior to the Bull Market run from 1922 through 1929 the Dow went through a 17 year period of volatility as well. Thus if history repeats itself the market will remain volatile for several more years and once this latest sharp oversold rally does peak it will likely be followed by another substantial correction or an extended consolidation period.
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