One final note on our prior discussions of 300 point rallies:

The first firm to make note of this (as far as I can tell) was a study by Lowry’s Reports. They discovered that during the 2000-2003 bear market, there were sixteen three hundred-point up days in the DJIA. Despite these big surges, the market continued to make lower lows. 

By contrast, this volatility was not present during the bull run from march 2003- October 2007. There were no three hundred-point up days during that entire period

Bear market rallies tend to be much sharper than bull market advances.  Volatility is higher, shorts have profits to protect, and bottom calls are rampant.

There you have it: The past bull market: None; the past bear market: 16.

>

Previously:
300 Point Dow Gains? During Bear Markets ONLY
http://bigpicture.typepad.com/comments/2008/08/300-point-dow-g.html

300 Point Rally follow up
http://bigpicture.typepad.com/comments/2008/08/300-point-rally.html

Category: Contrary Indicators, Markets, Psychology

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

22 Responses to “300 Point Rallies: Final Point”

  1. i'm just saying says:

    Semi-off topic rant….I agree with the general conclusion above, but I wish whenever market studies are done they…

    1. Use the SPX as it’s the institutional benchmark/most liquid/traded futures contract/etc.

    2. Use percentage moves and not points.

    Naturally if the premise is broad enough points 1 and 2 don’t matter….but just want to bring some rigor/apples to apples comparisons into market analysis.

    Cheers.

  2. In cash says:

    BR:

    I’m with you in this analysis.
    I just don’t understand this “fixation”, in the 300 poit gain.
    Why not 400 instead?.
    And most of all, why not a relative measure like 3% or 3.5%?
    I just don’t get it.
    From a daily reader

  3. Steve Barry says:

    All well and good, but this situation we are in is something none of us have lived through, unless you are approaching 100. You can’t really compare it to anytime, except 1929 and even then there are differences. The foundation of our financial system is built on a popping credit bubble that is stunning in its size, but the house is basically still standing…with the key caveat SO FAR. In 1929, debt/GDP spiked higher, mainly because GDP tanked. This time credit exploded and GDP is overestimated anyway. Even if we believe our current GDP numbers, debt/GDP is on the moon compared to all other times in history. Assets of all types were pumped up by debt and you will now have a deflationary crash in asset prices.

  4. Kid Dynamite says:

    Come on barry, you’re too smart to perpetuate these lies: from the October 1998 lows to the end of the rally in May 2001 we had a BULL MARKET – right? there were SEVERAL 300 point rallies in this period.

    as i commented before – when these rallies happened, they were part of a bull market… in HINDSIGHT, they also ended up being part of a market selloff and subsequent bear market. Each point in time is not a distinct “bull” or “bear” point.

  5. Greg0658 says:

    300 milliliters spilt milk – go get the dish rag – sop it up – wring it out

  6. In cash says:

    BR:

    Could you post a chart of the S&P500, with the days the index rise 2,5 %, in the last 20 years?
    If this is not possible, doses anyone knows a site where I can get this chart?
    A picture is worth a thousand words

  7. leftback says:

    All very interesting – although a lot of us don’t think about the Dow much these days, only Larry K loves to use Dow numbers. However you measure it, the point is these rallies are all humongous because they are amplified by a short squeeze.

    But all the REALLY interesting action this week was occurring in the currency and bond markets – Treasury yields have been falling all week and the 5-year is getting close to 3.00. The rumblings from the other debt markets are getting louder.

    US equity markets don’t seem to be responding positively to falling oil prices any more – perhaps the deflation message is beginning to get through?

    Brilliant stuff recently, Barry. Thanks for all the hard work. Reading TBP helps keep one from going insane during bear market rallies….

  8. Reino Ruusu says:

    This is quite understandable. The biggest moves aren’t created by people entering into positions.

    Massive moves more often result from people being forced by margin calls into exiting them. These margin calls create a positive (ie. self enhancing) feedback mechanism.

    This is why the “backward” moves are bigger.

  9. Lawrence Chiu says:

    Barry, regarding the missing 90-10 days (where 90% stocks advance and 10% decline) which were seen marking the bottoms in prior bear markets, is this assumption still valid with all the inverse-products out there?

    The last bear market ended in 2003. Today, we have inverse-financials (SKF), inverse-utilities (SDP), inverse-energy (DUG), etc. Given that these products don’t exist back then, how can we still expect 90-10 days. Even if the market were to collapse, there will be significant financial instruments rising because they are opposites.

  10. Eric says:

    leftback, I agree that TBP has become mandatory daily reading. but you hit upon one of its dangers when talk about how it keeps you from “going insane during bear market rallies.” I have always gotten the sense that the site is a sort of therapy for the many Fleck types who hang out here — there’s a lot of reassurance to be had. but remember that BR’s firm can and does buy good ol’ fashioned U.S. stocks even as the downbeat posts march along. Three years from now, we could very well read something like, “We just sold some of our Siemens stake at $163 that we had picked up back in the gloominess of 2008 at $112.” I’m not saying they’re doing that now, but don’t read too much into the posts in terms of what BR is actually recommending on the buy/sell side of things.

  11. Steve Barry says:

    When Russia threatens to nuke Poland, I don’t think you have to worry about any more 300 point rallies.

    Russia: Poland risks attack because of US missiles By JIM HEINTZ, Associated Press Writer
    2 hours, 17 minutes ago

    MOSCOW – A top Russian general said Friday that Poland’s agreement to accept a U.S. missile interceptor base exposes the ex-communist nation to attack, possibly by nuclear weapons, the Interfax news agency reported.

    The statement by Gen. Anatoly Nogovitsyn is the strongest threat that Russia has issued against the plans to put missile defense elements in former Soviet satellite nations.

    Poland and the United States on Thursday signed a deal for Poland to accept a missile interceptor base as part of a system the United States says is aimed at blocking attacks by rogue nations. Moscow, however, feels it is aimed at Russia’s missile force.

  12. Eric Davis says:

    Good,

    Thank god we are fighting the last war, or I’d be worried.

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    NUVASIVE (NUVA) Fast Growing Spinal Surgical Company – held up while all other stocks fell -

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    SYBASE (SY) Enterprise software has been strogn all yr and co. reported great qrtr.

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  14. ChrisL says:

    History will likely repeat itself. This bear market is not even half way through. It’s a day trader’s dream, but they are probably now real estate agents getting back to trading :)

  15. Chris D. says:

    Good point, Steve Barry. Putin is playing this one like a pro. He’s going to use the neocons to create a new Cold War that will allow him to build Russia’s economy like we did ours during WWII. He’s got a lot more slack to work with. I might start looking at Russian stocks. Let the neocons have their beloved missile bases, I’ll take good old fashioned American profits–even if you can’t find them in America anymore. The only revenge is to live better than the fools.

  16. Francois says:

    “There you have it: The past bull market: None; the past bear market: 16.”

    CQFD!

  17. Odysseus says:

    in cash:

    Yahoo Finance allows you to download the historical prices for ^DJI, ^IXIC, and ^GSPC. You can import these into a spreadsheet, and calculate the percentage moves relatively easily. The number of 2% up moves ((close-open)/open) in the NASDAQ, for instance, is:
    12 2008
    3 2007
    4 2006
    1 2005
    5 2004
    15 2003
    37 2002
    42 2001
    44 2000
    17 1999
    12 1998
    5 1997
    1 1995
    1 1992
    2 1991
    1 1990
    1 1989
    3 1987
    2 1984

    My charting skills are not good enough to build a candle chart with these days marked.

    Looking at the 2% down moves gets pretty exciting too:

    13 2008
    6 2007
    3 2006
    1 2005
    8 2004
    12 2003
    42 2002
    50 2001
    73 2000
    26 1999
    17 1998
    5 1997
    7 1996
    3 1995
    3 1994
    1 1993
    1 1992
    1 1991
    1 1990
    1 1989
    1 1988
    5 1987
    1 1986

    So 2000, with 44 different +2% days and 73 different -2% days, was simply an incredibly volatile year. That’s close to a majority of trading days being big moves.

  18. DavidB says:

    Why is it that whenever there is a war in Europe Poland is always one of the first ones to get beat up?

  19. flenerman says:

    It’s the same old song, DavidB, location, location, location.

  20. Greg0658 says:

    The darling health care industry I predict will not be so darling in the future / aspiring nurses beware.

    Medicare is red-lining. Corporate & government outlay decisions for healthcare versus maintaining current needs of infrastructure – I expect people who do not have cash will just get sick and/or die – perpetuating costs for all, so more will die.

    This is why I’m looking into the generation numbers of baby boomers, Xers, and Millennials.

  21. bullbear says:

    I think we can all agree that a bull market starts at the same time that a bear market ends — at the low point of the market prior to rally. The Dow made its ultimate lows of the ’00-’02 bear on October 9th, 2002, and not anytime in 2003. In the week after the 10/9/02 low, the Dow had two 300+ point moves. We’re I’m from, that’s two 300 point moves in a bull market. Are you just making the period from 10/02-3/03 disappear?

  22. Jetlag says:

    “but remember that BR’s firm can and does buy good ol’ fashioned U.S. stocks even as the downbeat posts march along. Three years from now, we could very well read something like, “We just sold some of our Siemens stake at $163 that we had picked up back in the gloominess of 2008 at $112.” I’m not saying they’re doing that now,”

    WTF? Siemens is German, LOL

    I guess you were trying to say GE or something.