Wednesday, July 29, 2009

Two Great Bounces!

The following chart is a simple comparison between the big stock bounce that occurred in the wake of the DOW crash of 1929 and the bounce we are seeing today in the S&P 500 index.

The method of alignment was simple… take the first definitive up trading day off the bottom of the preceding bear market low and set that as the start of the series… then I simply re-base both series to a value of 100 so that they could be compared side-by-side.

The S&P 500 is up over 35% in just about 100 trading days… a fairly aggressive run… even a note of mania to it… and wholly comparable to the price movement seen in the 1930s-era DOW rally.

At this point in the 30s-era DOW, you would have had approximately 10 days to trade out of you positions before the first leg of decline ensued chopping the gains nearly in half.

I’m not saying it’s going to happen… Just keeping a watchful eye…