Stock markets: Extended trading range?
Posted By Prieur du Plessis On September 18, 2010 @ 10:15 am In Investment,Stocks | No Comments
I have argued for a while that stock markets will probably be fluctuating in broad trading ranges for a while. This is a viewpoint [1] also shared by Marc Faber and backed up by my study [2] of expected returns.
More evidence comes from Chart of the Day [3], 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 [3].
The study’s conclusion more or less ties in with how I see the lie of the land.
[4]
Source: Chart of the Day [3], September 17, 2010.
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URL to article: http://www.investmentpostcards.com/2010/09/18/stock-markets-extended-trading-range/
URLs in this post:
[1] viewpoint: http://www.investmentpostcards.com../../../../../2010/09/15/marc-faber-stock-markets-in-a-trading-range/
[2] study: http://www.investmentpostcards.com../../../../../2010/08/26/us-stock-market-returns-%e2%80%93-what-is-in-store-4/
[3] Chart of the Day: http://www.chartoftheday.com/
[4] Image: http://www.investmentpostcards.com/wp-content/uploads/2010/09/chartofday.jpg
[5] Did you enjoy this post? If so, click here to subscribe to updates to Investment Postcards from Cape Town by e-mail.: http://www.feedburner.com/fb/a/emailverifySubmit?feedId=921608&loc=en_US
[6] (What's this?): http://www.wikinvest.com/blogger/wikinvest_wire
[7] How to Safely Double Your Dividend Yield With Covered Call Options: http://moneymorning.com/2012/01/19/how-to-safely-double-your-dividend-yield-with-covered-call-options
[8] The Great Minds of the Market: Charles Dow: http://www.investmentu.com/2012/January/charles-dow.html
[9] Hiring Surges in Pimps, Prostitutes and Drug Dealers: http://www.wealthdaily.com/articles/hiring-surges-in-pimps-prostitutes-and-drug-dealers/3386
[10] Dow Jones Industrial Average (DJI): http://www.wikinvest.com/index/Dow_Jones_Industrial_Average_(DJI)
[11] Stock market: http://www.wikinvest.com/wiki/Stock_market
[12] Wikinvest: http://www.wikinvest.com
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