Chart of The Day: A Historical Perspective on Post-Massive Bear Market Rallies

Today's chart illustrates rallies that followed massive bear markets. For today's chart, 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).

Today's chart also adds the rally that followed the dot-com bust during which the Nasdaq declined -78%.

The current Dow rally has followed a somewhat middle of the road path and has most closely followed the post dot-com bust rally that began back in 2002.

If the current rally were to continue to follow the post-massive bear market rally pattern, the market would have to resume its rally in relatively short order.


Commentary & Analysis Courtesy of Chart of The Day

Survey: Is There A Greater Probability of a +20% Rally or a -20% Correction?

Since the last time this survey of stock market strategists was done in January 2011, the number of respondents who see a -20% decline as being more likely than a +20% rally has reversed.

Now the majority (by nearly 2 to 1) expects a -20% decline    before the next +20% rally.

Survey: Is There A Greater Probability of a +20% Rally or a -20% Correction?

Post-Massive Bear Market Rallies: Historical vs.The Present

Chart & Analysis Courtesy of ChartOfTheDay.com

Today's chart illustrates rallies that followed massive bear markets. For today's chart, 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).

Today's chart also adds 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 the Nasdaq rally that began in late 2002 as well as the Dow rally that began in 1942.

It is worth noting that after 300 (plus or minus) trading days the market moved into a trading range/choppy phase that lasted for a year or more.

Chart of the Day: Charteristics of Post-Massive Bear Market Rallies

Chart & Analysis Courtesy of ChartOfTheDay.com

Today's chart illustrates rallies that followed massive bear markets.

For today's chart, 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).

Today's chart also adds the rally that followed the dot-com bust during which the Nasdaq declined -78%.

One point of interest is that the current Dow rally has followed a path that is fairly similar to that of the Nasdaq rally that began in late 2002.

It is also worth noting that each rally lasted from about 300 to 370 trading days and then moved into a trading range/choppy phase that lasted for a year or more.

In the end, the current post-massive bear market rally is by no means atypical.

Chart of the Day: Stock Market Rallies Since 1900

Chart Courtesy of ChartofTheDay.com

"The current Dow rally is well below average in both magnitude and duration."

The Dow made another rally high  in 2010. To provide some perspective to the current Dow rally that began back in March, all major market rallies of the last 110 years are plotted on today's chart. 

Each dot represents a major stock market rally as measured by the Dow. As today's chart illustrates, the Dow has begun a major rally 27 times over the past 110 years which equates to an average of one rally every four years. 

Also, most major rallies (73%) resulted in a gain of between +30% and +150% and lasted between 200 and 800 trading days -- highlighted in today's chart with a light blue shaded box. 

As it stands right now, the current Dow rally (hollow blue dot labeled you are here) has entered the low range of a "typical" rally and would currently be classified as both short in duration and below average in magnitude.