Rally Rank: 27 of 4,237
By Barry Ritholtz - April 13th, 2010, 12:30PM
Fascinating chart showing the bell curve of historical 55 week rallies in (not quite) deciles. The present rally ranks in the top 1% of all 55 week rallies.
For context, I’d like to see a way to normalize the data — or at the very least, compare the rally to the 55 weeks prior to its beginning. I assume the second ratio would be contextually informative.
Nonetheless, this is an interesting chart:
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55 Week Rallies Distribution of Gains
click for larger graphic
Chart courtesy of The Chart Store
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April 13th, 2010 at 1:17 pm
Of course, I sat this one out with about 60% cash. I still, still don’t believe things are getting better. The economy is crap, unemployment is ridiculous and people are not spending money. But hey, Obama’s in the White House spending our kids/grandkids life savings away and everything will turn out great.
I didn’t like GWB spending all our future generations money, but even he wasn’t on this type of pace. I work in the education field and you can’t believe how much federal money has been pumped into the system since Obama has taken office. You know what it funny though, we can’t use it to hire people (because the funding stops in a year), we can only use it to buy technology (Dell was a big benefactor of these funds).
I digress, how is it again the market is flying like it’s 1999? Anyone have a reasonable answer for this?
April 13th, 2010 at 1:22 pm
“All other higher ranked 55 week rallies took place in either 1933, 1934 or 1936″
Further proof that this is the the GREAT recession.
April 13th, 2010 at 1:47 pm
4,237 fifty five week rallies in 80 years. Now there’s some fun with stats!
April 13th, 2010 at 1:56 pm
I think it is most definitely proof of just how reactice investors are to news, and the seemingly never end to it. While banks were crumbling, newscenters like CNBC just reaped in the ratings. Now that things have “stabilized”, ratings are waaaaayyy down and the network is doing anything it can to get eyeballs to come back.
I wonder how big a part energy costs had in the rallies of the 1930′s? Is there anything like energy that could act as a trigger to stop this rally? If there is, I want to invest in it!
April 13th, 2010 at 2:15 pm
Son Of Flubber rally. The little man who lives in my head says that gravity is going to kick in at any moment now.
April 13th, 2010 at 2:41 pm
The peevish ‘recovery denial’ exhibited by GOP-partisan Martin Feldstein at the recent NBER meeting and his run to CNBC to justify it “we’ll have a double dip recession” will be the final nail in his credibility coffin when we don’t have a double dip.
http://www.ft.com/cms/s/0/ef053280-4695-11df-9713-00144feab49a.html
Hey Feldstein, you look at PAST data and make a declaration not GUESS about the future. Thank goodness for NBER member Gordon, “It’s obvious the recession is over”
http://bostonherald.com/business/general/view.bg?articleid=1246743&srvc=business&position=4
What scares the Tea Party and they supporters like Feldstein? That the Reid/Pelosi/Obama measures WORKED.
Feldstein is a tool and has been since his Nixon-sucking days. Good riddance to his tattered ideology.
April 13th, 2010 at 3:28 pm
VD-
dude- you’re hopeless-
a one trick pony- w/ only one discussion point-
you are the only one who seems to give a shit about the Tea Party because you bring them up no matter the subject-
see a fucking shrink
April 13th, 2010 at 3:49 pm
I think this rally will eventually rank #1.
But you guys know that already.
April 13th, 2010 at 5:37 pm
What Super Trooper says. Let’s party like it’s 1936.
April 13th, 2010 at 6:31 pm
How does this compare with other rallies with .25% interest rates? Oh yeah, it’s one of a kind!
What does Helicopter Ben do for an encore when the Alt A s go tits up?
April 13th, 2010 at 8:15 pm
From Fed Lacker:
“Tight credit often gets the blame for holding back small-business expansion these days, but according to a recent survey by the National Federation of Independent Business, weak sales are by far the No. 1 problem facing small businesses,” Lacker said.
As I’ve been saying, our business had its worst March in nine years. Also, as I’ve been saying, all the other small business owners I meet/work with said the same. I was called out for posting that so at least we’re seeing some confirmation that I’m not completely insane.
Maybe the big retailers are seeing gains but us little guys out here are struggling.
April 13th, 2010 at 8:38 pm
@wanger: It does seem to be becoming more of a big guy’s game everyday.
Better be a big customer of one of the bigger banks.
April 13th, 2010 at 9:10 pm
Hmm, yea this is interesting Barry.
I’m not sure how mathematically inclined you are, but one of my skill sets includes a fairly formidable understanding of mathematics.
If the distribution of 55 week gains by percentage of gain is indeed normally distributed, this implies the occurrence of any particular percentage gain ( from 1% to 80% over that period) is random, ie. all events are equally like and independent. As Barry has said in prior posts, correlation does not imply causation, but if we extrapolate this to the large swing of market moves, than it might be true that any 55 week interval can equally-likely cause and type of percentage gain. Hence just because one 55 week period earned 65% does not imply anything about what the next 55 weeks will entail, and — if we assume the normal distribution holds over all possible gains and losses — there is no guarantee the next 55 weeks will even post a gain.
This might be true no matter what interval of time less than 2 years.
It is also true that the price distribution over time is not a random walk, since although the number of stocks is large, the number is very less than infinite, but more importantly, because the very act of buying and selling influences prices, so prices are not independent events.
But the chart Barry shows refers to the randomness of the historical shaping or swings of the market as a result of human interaction — which to me is a different set of events.
Anyone else have any thoughts on this.
April 13th, 2010 at 9:12 pm
As for the fools above : Egads gentleman, stick to a topic. You remind me of toddlers who can’t stop shaking the only toy mommy gave them. Grow up.
April 13th, 2010 at 10:56 pm
This is part of the plan……….that of the federal reserve board.
My take is they’re trying to make the banks “earn” their way out of this……and by that I mean…….giving Barry Bonds steroids and giving him a tee to the hit the ball after reconstructive knee surgery.
Venn…….the stimulus is back loaded. Besides…..even if it weren’t – it pales in comparison to what the fed has done.
Inflation is what all the major stakeholders of this economy need. And, looking at the reserves pile up……..I’m beginning to come around to Steve Keen’s point of view…….demand for credit sparks the multiplier……I’m paraphrasing……
Only large institutional and corporate clients can/want to access the debt market now.
I believe the longer the fed is on hold, the longer a sustainable growth rate for the economy can take shape. Sure, pulling back the punch bowl is ultimately bearish short term……but, we’ve got to walk on our feet someday. The sooner the better.
As someone who is politically on the right…….I believe GOP takeovers of federal and state houses will be short term bearish. That will put a lid on this rally. The GOP………if they follow the mandate of what seems to be the voters wishes…ala NJ……..and I’m doubtful of that…….will pull stimulus out of the budget and destroy debt creation by governments in this country. In a deflationary environment……..that’s bearish. I believe its the right thing to do…….but, either way, via inflation, or deflation…….it aint gonna be pretty.
April 14th, 2010 at 1:18 am
Hmmm, seems to be a somewhat arithmetically challenged study.
April 14th, 2010 at 4:18 am
@VennData
I remember Martin Feldstein was very timely in calling the Dec-07 recession and BR listened to him at that time.
April 14th, 2010 at 12:48 pm
[...] the current rally. (Big Picture, [...]
April 14th, 2010 at 9:37 pm
Hi Barry or anyone with advice:
I am an expert shirker, don’t work in the FS industry, but either do excel for fun or for work, so I coincidentally did a similar analysis just before reading this. Barry says this needs to be normalized but I’m just wondering how? All I did to get very similar results was measure how many up or down days there were in the last 50/100/200 trading days and did a distribution. This is how I am very sure that with over 4,000 samples of 55 day rallies, he is measuring consecutive 55 week periods with a gain.
I did not think to normalize, but during a long winning streak there will be periods where each day adds one more sample of high numbers and each extra day in a bear low accentuates those samples. This did not sit well with me, but is there a statistical method to normalize and still use this technique. I’m going to do another and qualify it to say that out of all x% rallies from start to finish, this one ranks as either the “fastest”, “steepest”, “biggest reversal” (you can see my bias), but I still don’t want to let go of this one, because we’re getting to extreme readings.
One proposition this may support is that bull markets last longer than bear markets, otherwise the mean should be 0.
Thanks for any input.
April 16th, 2010 at 9:52 pm
[...] the current rally. (Big Picture, [...]