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In our October 13, 2008 article, we reviewed all seven bear US stock markets since 1900 and found out that the development of this bear market is very similar to the one we experienced from February 1937 to April 1942.

Now, almost two years passed after the publication of our article, the market trend is still following the February 1937 - April 1942 trend closely. The chart below (click to enlarge) showed what has happened sine October 2008. The thick red line gives the trend for the latest 20 months.

Observations:

  1. The bear market started on October 11, 2007 with the S&P 500 index high at 1,576.09.
  2. The market reached the bottom on March 6, 2009. The index low was 666.79 a loss of -57.19% from is high. The first phase lasted 16 months.
  3. The next 11 months saw the second (bounce-back) phase during the bear market and the market made a +81.62% run and reached a high of 1,211.07 on April 26, 2010.
  4. Now we are two and half months into the third phase of the bear market. As of July 2, 2010, we are in a loss of -35.86% from market high of 1,576.09 in the month 30.
  5. S&P 500 has so far repeated the Great Depression history pretty well. If we assume that history will continue doing so, we may see flat trend next month or two and may bounce back during September - October months and turns down in following months.
  6. That means, we are half way into the bear market. We can then make our investment decision based on our observations.

Disclosure: We are long on some short ETFs such as TZA ...

Source: Are We Entering Another Depression?