Is A Bear Market Rally Around The Corner?

Although the longer-term outlook for share prices remains bleak, it is worth bearing in mind that markets rarely move in a straight line.

Even during the Great Depression, when the Dow Jones Industrials Average (^DJI) lost nearly nine-tenths of its value over the course of three years, there were numerous upside corrections during the period.

In fact, the following chart, courtesy of AlphaTrends, details eight double-digit percentage-point rallies that took place from 1929 to 1932.

As someone who has been around markets for a while (with plenty of scars to show for it), it is hard for me to look at the level of extreme pessimism and the number of indicators flashing ”oversold” in today’s equity markets and not think prices are probably due for one of these periodic, hope-breeding rebounds.

That doesn’t mean I’ve turned bullish, of course. Just realistic.

Posted in Categories: Contributor, External Research, Stocks.

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