Picture du Jour: Stock market rally long in the tooth

By Prieur du Plessis, on August 29th, 2009 posted in: Investment, Markets, Money

How does the nascent stock market rally compare with the 1929-1932 bear market, which also included bank failures, bankruptcies, severe stock market declines, etc.?

For some perspective, Chart of the Day provided the graph below, illustrating the duration (calendar days) and magnitude (percentage gain) of all significant Dow rallies during the 1929-1932 bear market (solid blue dots).

As the chart shows, the duration of the current rally of the Dow Jones Industrial Index (hollow blue dot labeled “You are here”) is longer than that of any of the rallies that occurred during the 1929-1932 bear market. The bear market rally that began in November 1929 lasted 155 calendar days and occupies the second position. However, as far as magnitude is concerned, the November 1929 rally (+48%) resulted in a better performance than the 46% gain of the Dow since the low of March 9.

Source: Chart of the Day, August 28, 2009.

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Alex

August 30, 2009 at 10:13 am

Hi Prieur,

But what does it all mean for the future and what occurred after the rallies listed.
I feel the chart should explain more as to what happened next in order that we can use history as a guide to the future.
IE: After Nov 29 rally market then plunged X % for X days before the Jun 30 rally of 15%.
Therefore this indicates that the 45% rally of 09 could be followed by an X % decline where even the next rally to come does not breach the lows of this rally indicating X.
Thanks Alex