Over the past few weeks, we have taken several looks at the duration and intensity of this rally (see this, this and this).

The following chart, from Ron Griess of the Chart Store really puts this into context:

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S&P Composite 102 Week Rolling Returns

Category: Markets, Technical Analysis

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.

24 Responses to “Another Look at Rally Intensity”

  1. epupo says:

    In those 2 spikes, the post-rally dips seem exceptionally high. This appears to be stating that we would roll back a large portion of these gains, maybe back to 2009 levels.

  2. tradeking13 says:

    I guess this is what trillions of dollars in government largess buys you.

  3. epupo says:

    Its amazing to look at that those links and read some of those comments from 2009-2010, and then compare them to where we are now.

    I find it highly unlikely that any of those commenters in 2009 thought we would be at S&P 1337 in February 2011.

  4. Sunny129 says:

    As long as Ben is in denial of inflation creep and promising QExxxxxxxx, nothing matters!

  5. Marcus says:

    You mean nothing matters, until it does. I expect the turn to be sudden, abrupt, and relatively unexpected.

  6. whodunit says:

    Has anyone read The Great Contraction? Did the FED make mistakes in the 30′s that they want to avoid now? I think so. So the great historical whackage indicated by the chart may not pan out the same way, and is only one part of the equation.

  7. epupo says:

    I would add that the Fed of the ’30s probably had no idea what the acronym QE meant or what to do with it.

    Although I can imagine stock market operators of that day would have found QE to be the greatest invention of all time.

  8. Moss says:

    Since this is clearly a Fed induced spike and benny is a scholar of the depression it would seem that he will over compensate for the ‘mistakes’ perceived or otherwise the fed made make then. These mistakes on the surface appear to be letting up on the pedal too soon. The fed will never be able to ‘exit’, TPTB will not allow it.

  9. whodunit says:

    I think BR covered how well politics and investing mix recently.

    What BB did, backing banks in 2009 ( funny how we bottomed then), was what the fed of 30′s did not for starters,, and that was the gift that kept giving, along with bowing to austerity forces once a expansion gained some traction in the 30′s.

  10. krice2001 says:

    The Fed appears to have at least temporarily managed to suspend the laws of physics and math. Things appear quite “stretched” at the moment (and probably have been for a little while now). But momentum or maybe it’s inertia (the tendency to move in the same direction unless acted upon by an outside force) seems to be in the driver’s seat. One could reasonably argue that QE is an outside force, itself. But once that’s been accepted as part of the environment and is seen as reasonably reliable, does it then require some other force of sufficient strength to derail the current strong uptrend?

    Since the market can move in ways to maximally hurt the most people, what happens next? Does it refuse to correct for a really long time thus frustrating those looking to finally get in or get back in or just to add to their positions? Or does it somehow lure everybody into a euphoria and then whipsaw so quickly that even the twice burned individual investor has no time to hit the panic button?

    Sorry, just “thinking out loud…”

  11. crunched says:

    My thoughts exactly. The destruction Bernanke has caused and will cause, is a class case of overcompensating. He’s let history be his guide to a problem that only vaguely resembles the circumstances surrounding the original problem.

    If and when the economy does ever improve, the one instrument that could have helped out everyone – the stock market – will be so overpriced it’s ridiculous. And fixed income won’t be an option because of the QE’s that will have to be unwound.

    Obama had a chance to do away with Bernanke but didn’t for political reasons. This is what happens when you elect a President with no experience.

  12. realgm says:

    Having this chart out. Do you still think that a mild 5~8% correction is coming in the corner?

    It seems that the market will keep going up (no selling pressure) until some “bad” news break up to trigger the “smart money” to exit and eventually lead to a significant drop instead of a mild 5~8% correction.

    In the video with you and Doug Kass, he’s predicting a 10%+ correction. What do you think of Doug Kass’ prediction? Although he had been rather bearish for quite a while, he had been wrong though.

  13. Bill W says:

    It’s probably true that the FED of 2011 is adding more liquidity to the system than the FED of the 1930s.

    But.. wasn’t that true before 2008. Hasn’t it been true since about 1987.

    Everything is relative. We got to the pre-crash stock market values, because we had an accommodating FED and a pro-business government. The fact that we have that now does not guarantee higher stock market prices forever. If the FED was omnipotent, there never would have been a financial crisis.

  14. drey says:

    “I expect the turn to be sudden, abrupt, and relatively unexpected.”

    Yeah, and relatively sustained, I would think. This isn’t setting up for a mild correction. The question, of course, is when…

  15. crunched says:

    We’ve definitely passed the point of a ‘mild correction.’ Too many people have nervously added at these stratospheric levels and will sell in a heartbeat at the first sign of danger… purely from the anxiety of not wanting to be buying at the top.

  16. crunched says:

    …that is, unless most of the buying has just been the bots churning the market up, which is a distinct possibility. In which case, there are no real buyers underneath and the market will fall twice as hard. See: flash crash.

  17. nofoulsontheplayground says:

    There is a “mirror” pattern on that chart. Take the 1974 low, draw a vertical line through it, and work out right and left.

    If the pattern plays out, the current rise would take the S&P to match the 1937 top, followed by the rest of the pattern to the left of the 1937 top on the chart.

    Eventually these patterns stop working at some point. The question is, will this keep going until we get the 1932 80% drop 6-years from now? Coincidently, that’s around the time a 17-1/2 year cycle low is due.

    This chart pattern suggests a strong inflationary environment during the next half decade, followed by some kind of huge, systemic financial bust.

    During 1932-1937 the Dow went from 38 to 190, a 400% increase off the 1932 lows. If this “mirror” pattern follows, it suggests the S&P should be around 3300 about 4-years from now. Of course, while the nominal gains off the lows would be about 400%, we are not certain what the real gains would be.

    Oh, an 80% drop from 3300 SPX would take the SPX to……..a test of the 666 2009 lows in late 2016 or early 2017.

    That would be the buy of the century, provided you survived the systemic financial upheaval that would produce such a low.

  18. JimRino says:

    Since the “Bush” tax cuts have been extended again, [ we we're really concerned about the D. word ], you have a lot of rich people with extra money to Bubble Up the Stock Market Again.

    Isn’t that what you wanted?

  19. JimRino says:

    I’m just ASTONISHED at the volatility.
    And the regularity of the volatility.
    Why did we ever think we had conquered the business cycle?
    Is that what this is?

  20. JimRino says:

    The problem with buying at the bottom is, when the bottom hits most people have No Confidence it’s a Real Bottom. It feels like standing on a TRAP DOOR.

  21. DiggidyDan says:

    I will agree with epupo and JimRino. A lot of us here at TBP would never have thought we would be where we are now (myself included) and a lot of us were scared shitless and had no confidence that 666 bottom was the REAL bottom. I remember Leftback calling a bottom and many agreed it was a local bottom and invested at the time, but were under the impression it was a bear market rally and could turn at any time ripping our faces off. Luckily, as it has risen, many were also inclined not to fade it or try to go short in the face of such strong momentum and still let it ride, thus not missing out completely on one of the biggest rallies ever.

    I remember suggesting in March 2009 a theory of “Bifurcated Reflation” that suggested buying into basic materials, energy, commodities, ag, etc. on the premise of monetary phenomenon and policies inflating some assets while others stagnated based upon the Fed’s stated goal of staving off deflation. This has done EXTREMELY well since then, with the exception of my BP holdings, but hey, I couldn’t see that one coming! Some of my picks at the time were ADM, BHP, BP or CVX, GSK, JNJ, MMM, PCU, SIAL, VIVO. The one that got away I wish I had picked was WPZ. I was researching that around 10 and the teens and couldn’t pull the trigger because it looked WAAAAAAY to good to be true. Freaking 25% dividend yield at the time and I didn’t think I knew enough about it. It has since quintupled and now has a dividend yield on cost of over 30% from its low. JEBUS!

    I remember then getting antsy at around 1174 and selling some, but then when QE2 was announced thinking “Oh it’s on again”, and picking up more commodities in the form of the ETF DBC and some long term TIPS to hedge against inflation (which hasn’t done that well-not bad, but not good).

    Needless to say a lot of us were scared as hell it would end at any time during the whole runup, but still stuck to it because of the aforementioned monetary effects and the trend riding. To quote things that have been oft mentioned “follow the path of least resistance” “don’t fight the tape, and don’t fight the fed” and “do you want to be right or make money?” I think I will wait for the trend to turn before I sell more, but I have a chunk of cash sitting around (albiet making about 4% interest in my credit union, great deal!) and money in long term tips that hasn’t been doing much I have been keeping dry for the last couple of months because my valuation metrics I follow that are based on things such as CAPE, Tobin’s Q, Sentiment, and VIX have indicated not to buy at this level. I still think it has a little bit to run, but people are starting to talk about making money in the stock market again, sign of Stage 3. Hopefully this disciplined approach will continue to be prudent. Getting itchy to buy again and want to do it on the cheap!

  22. towenmiller says:

    I’m one of those guys your note above refers to, ignorant, and to some degree not so great with empiracal data. I watch the market from some distance as a minimal investor and see the highs and lows and the in betweens. Patterns seem to repeat themselves with peaks followed by troughs as if the market breaths in while at a low point and money flows inwards — possibly with increasing velocity as the trend upwards increases — to a point and then the next decrease begins — as if the market is breathing out and in that outward breath those who are savy and on the inside move their gains to some other “safe” place (whatever thaat might be). It all looks to be a great game and if you play along well you can ride the pony with those who actually make the market and get some gains yourself — especially if you are not silly enough — like me — to let individual stock investments sit for the long term. But you better be ready to move quickly or you will be left in the trough.

    So after this proof of my ignorance, I do have a question. Pick a time, any time but lets say 25 years ago and tell me how the metric indicating overall market value — and those in between — compare to today’s summative value. Is the value in 1986 dollars greater or lesser than that today? And I do recognize in this queston that the makeup of the various indices over time has changed with some companies coiming in and others going out. But we do put great stock in that one index value day to day so is yesterday’s $x less than, greater than, or the same as today’s $x?

  23. [...] at the Big Picture. Today’s TCS table looks at rolling 102 week returns (previously reviewed as Another Look at Rally Intensity, see [...]