A month ago, before the latest market crash started, most pundits were crowing about a standard cyclical recovery and a Great New Bull Market.
Maybe they’re right. And, if so, we’re finally getting a buying opportunity. But these fair-weather bulls have gotten awfully quiet of late.
Meanwhile, it’s worth noting that the massive 40% rally off the bottom could have been just another dime-a-dozen suckers’ rally on the way to a new market low.
If so, this would hardly be a surprise. For one thing, the market didn’t get nearly as cheap as it usually does at the bottom of a major secular bear market (single-digit PEs). And another leg down would be in keeping with the way other massive crashes have behaved.
Let’s take a quick look at history.
Chart-master Doug Short updates his excellent “Four Bad Bears” chart every day. Here’s where we are relative to the 1929 crash, the 2000 NASDAQ crash, and the 1990 Japan crash. (Our current crash is the blue line…)
So we’re down by about half from the peak. And, for now, we’re doing better than the trajectory of the Great Crash.
And now let’s take a closer look at the intra-bear rallies and crashes of our current bear market:
OK, sure, there are lots of up and downs. But a 40% rally off the bottom? That’s waaay bigger than any previous rally in this bear market. So that has to be the start of a Great New Bull Market, right?
Here’s what happened during the Great Crash, for example (again, from Doug Short):
See those bear-market rallies?
And here are the ones we’ve had so far:
Not much different. Our great crash just got started slower than The Great Crash.
By the way, as Doug Short noted yesterday, our great crash looks almost exactly like The Great Crash if you measure from the point where the markets began their violent 50% drops.
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