Big Stock Market Rallies in a Bear Market

March 10, 2009

At mid-day in New York, the Dow Jones Industrial Average shows a gain of 5% since the open.  We are possibly on our way to the tenth daily increase of at least 4% since a record closing high of 14165 in October 2007.  Daily moves of as much as 4% are usually very uncommon.  There were just twelve of them from the beginning of 1990 until the October 2007 peak, a period during which the market rose 414.5% on net, or 9.7% per annum.  By contrast, the market has tumbled at a 42.5% annualized pace since its record high in spite of those nine terrific days when the market spiked at least 4% each.  The lesson is to beware of extraordinary rallies imbedded within bear markets.  Counter-intuitively, such blowouts tend to be a sign of unhealthy markets.

Copyright 2009 Larry Greenberg.  All rights reserved.  No secondary transmission without express permission.


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