Investing & Markets

Make better decisions with investing tips, technical analysis, market commentary, and more

Personal Finance

Make more, save more, spend smarter, and keep more of what you earn

Business News

Stock market news & analysis

Market Outlook

Stock markets: Extended trading range?

By Prieur du Plessis on 09/18/2010 – 1:18 am PDTLeave a Comment

I have argued for a while that stock markets will probably be fluctuating in broad trading ranges for a while. This is a viewpoint also shared by Marc Faber and backed up by my study of expected returns.

More evidence comes from Chart of the Day, with a chart illustrating rallies that followed massive bear markets. 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). The chart also includes the rally that followed the dot-com bust during which the Nasdaq declined 78%.

“The current Dow rally has followed a path that is fairly similar to that of post-massive bear market rallies. The initial surge of the current rally lasted nearly 300 trading days and has been trading flat/choppy ever since. If the current rally were to continue to follow the post-massive bear market rally pattern, the current choppy phase would continue for another 200+ trading days,” said Chart of the Day.

The study’s conclusion more or less ties in with how I see the lie of the land.

Source: Chart of the Day, September 17, 2010.

Did you enjoy this post? If so, click here to subscribe to updates to Investment Postcards from Cape Town by e-mail.

Tags: bear, dow rally, marc faber, , market rally,

Related Articles:

  1. Ritholtz: Stocks – trapped in a trading range
  2. Big Bear Markets: More Than Falling Stock Prices
  3. What is Extended Trading?
  4. Stock markets on knife edge
  5. Picture du Jour: Why stock markets haven’t corrected yet

Leave a comment!

Add your comment below, or trackback from your own site. You can also subscribe to these comments via RSS.

Be nice. Keep it clean. Stay on topic. No spam.

You can use these tags:
<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

This is a Gravatar-enabled weblog. To get your own globally-recognized-avatar, please register at Gravatar.