Is the Market Bottom in Sight (Again?)
Posted By Barry Ritholtz On January 19, 2009 @ 8:27 am In Investing,Markets,Mathematics | Comments Disabled
Interesting take over the weekend in Marketwatch [1] on stock market bottoms relative to historic trendlines.In past bear markets, whenever equities as a group fall into the range of 40-42% below trend, at bottom was not far off.
HFN editor Peter Brimelow, along with ESR Research’s Edwin S. Rubenstein observe:
“We have looked at stocks relative to this long-term trend line. When we last looked, we found stocks were down 38% below trend, around the levels seen at historic bear market bottoms in 1981 (40% below trend), 1974 (41% below trend) and 1932 (42% below trend).”
The concept was developed via Jeremy Siegel’s Stocks for the Long Run [2]. (Note: Siegel does not necessarily agree with their conclusions).
Brimelow and Rubenstein show the historic relationship between the two via this chart:
[3]
The >
Source:
Stocks’ bottom in sight. Again. [4]
They can’t go much lower before reaching unsustainable depths
Peter Brimelow & Edwin S. Rubenstein
Marketwatch, 9:28 p.m. EST Jan. 18, 2009
http://tinyurl.com/stockbottomtrendreversion
Article printed from The Big Picture: http://www.ritholtz.com/blog
URL to article: http://www.ritholtz.com/blog/2009/01/is-the-market-bottom-in-sight-again/
URLs in this post:
[1] Marketwatch: http://tinyurl.com/stockbottomtrendreversion
[2] Stocks for the Long Run: http://www.amazon.com/exec/obidos/ASIN/0071494707/thebigpictu09-20
[3] Image: http://www.ritholtz.com/blog/wp-content/uploads/2009/01/stock-trend.gif
[4] Stocks’ bottom in sight. Again.: http://www.marketwatch.com/news/story/Market-bottom-sight-again/story.aspx?guid=%7BEA94AC84%2D50FB%2D4C77%2DA107%2DFAB68B606D03%7D
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