Thursday, December 26, 2013

is the secular bear over?

Here's an interesting video from Kevin Cook at Zacks.

Doing a search, it looks like Kevin is rehashing Doug Short's article.

The first chart is interesting.  It identifies five secular bull markets and four secular bear markets since 1877.

1877-1906 bull (334%)
1906-1921 bear (-69%)
1921-1929 bull (396%)
1929-1932 bear (-81%)
1932-1937 bull (266%) [I call this a bull even though the line is still red on the chart]
1937-1949 bear (-54%)
1949-1968 bull (413%)
1968-1982 bear (-63%)
1982-2000 bull (666%)
2000-2009 bear (-59%)
2009-present (115%)

[from the color on the chart, apparently there was no bull market in 1932-1937 and a secular bear from 1929-1949]

The question seems to be whether we are presently still in a bear market or whether it'll be like 1937 when the market rallied 266%, then pulled back 54%.

The next chart adds a regression line.  The previous bottoms were 33%, 59%, 67%, 59%, 55% below the trend line.  The previous tops were 85%, 81%, 12%, 55%, 151% above.

The 2009 bottom was only 11% below trend and we are presently 77% above.  The bear case is that there is more room to fall since the previous bears fell much further than 11% below trend.

But even if we're still in a secular bear (like 1929-1949), the market went 266% from the bottom, so we could have more room to run too.

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