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Putting This Rally In Its Place (Historically) at Trader’s Narrative





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Here is a chart plotting every single major rally in the Dow Jones Industrial index since 1900:

stock market rallies chart of the day Nov 2009
Source: Chart of the Day

While the Dow has surpassed its highs from last month, this has not been confirmed by other major indexes. In any case, there have been 27 significant rallies in the past 109 years of market history - not counting the current one. That’s about one for every 4 years. Paul Desmond of Lowry Research pointed out this four year cycle as one of his reasons for believing this to be a real bull market.

About three quarters of the rallies resulted in a gain of 30%-150%, lasting 200-800 trading days (9.5 months to 3.2 years). These are the data points highlighted in the blue shaded box above. The current rally is just shy of making it as it is too short in duration.

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3 Responses to “Putting This Rally In Its Place (Historically)”  

  1. 1 van

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    we need a better definition of a rally, eg, without correction greater than 10%; or a total bull move

  2. 2 Babak

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    van, that’s a tough one. There are many definitions floating around. According to Ned Davis, a bull market fulfills one of three conditions: (1) at least a 30% rise in the Dow in 50 calendar days, (2) at least a 13% rise in the Dow in 155 calendar days, or (3) at least a 30% reversal in the Value Line Geometric index.

  3. 3 van

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    I’d like to see the same graph, but only for those moves before a 10 % correction; they’re having the same discussion on this chart on TBP

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