300 Point Dow Gains? During Bear Markets ONLY

Merrill Lynch's David Rosenberg was on CNBC this morning, discussing the current Bear Market. He noted that this was the sixth 300 point rally to occur since September 2007 (markets peaked the next month) -- a period of time which can only be described as a Bear Market.

Even more intriguing, he observed that EVERY 300 point DJIA rally has occurred ONLY during bear markets. (Even the 1998 LTCM crisis saw two single-day gains of more than 300 points, September 8 and October 15, 1998. At its intra-day lows, 1998 had a 20% decline).



During the 2000 to 2002 bear market, the DJIA had 15 days where it gained more than 300 points. The first was March 15, 2000 (five days after the NASDAQ peaked) and the last was October 15, 2002, near the bottom of the bear market.

Hence, the odds are against making money chasing these 300+ point rallies.

During the 2002 to 2007 bull market, the DJIA had no days where it gained more than 300 points.

Jim Bianco asks: "What does the stock market do during bear markets? It has days where it gains more than 300 points in a day. What doesn't the stock market do in a bull market? It does not have days where it gains more than 300 points in a day."



What does yesterday's rally say about the state of the stock market . . .?

300 Dow Point Gains ONLY Happen in Bear Markets:





Source: Merrill Lynch

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Note: Watch Steve Liesman school Jack Bouroudjian -- he is essentially using the argument I gave him over the weekend when we taped a discussion on Credit Risk. We should see some or most of that interview when CNBC does its big Maine trip wrap up over Labor Day Weekend.

Wednesday, August 06, 2008 | 03:29 PM | Permalink | Comments (26) | TrackBack (1)

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One final note on our prior discussions of 300 point rallies: The first firm to make note of this (as far as I can tell) was a study by Lowry’s Reports. They discovered that during the 2000-2003 bear market, there were sixteen three hundred-point up da... [Read More] Tracked on Aug 15, 2008 11:41:49 AM

Comments

There are a lot of reasons to be skeptical of this market - but that "analysis" from the ML strategist is one of the weakest pieces of research that I've seen in many years.

Posted by: dan | Aug 6, 2008 3:53:51 PM