The Brave New Bull Market? Jeffrey Cooper Mar 27, 2009 10:05 am |
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After the crash into November 1929, a 50% rally played out into April. We have not yet seen a 50% rally since the crash. We have seen one 50% retracement since the bear market started. That was the rally into May of 2008. The high in October 2007 was 1576 S&P. The low in March 2008 (another March turning point) was 1257. A mid –point retracement works out to approximately 1416. The intraday high in May was 1440 while the weekly closing high was 1425.
Although we will not see a 50% retracement of the rally into April barring a miracle, the inflection point of time in April should be pivotal. Moreover, a 6 week rally off the low plays out into April as well. Many countertrend rallies play out over 6 to 7 weeks such as the April Advance last year.
A study of the chart from 1929 to 1932 is instructive. After the crash low a higher low and a swing above the first snapper unfolded into the 50% retracement into April 1930. Many of the brightest economists, politicians and traders of the time believed the worst was over by December of 1929. When a higher low played out in the stock market it most certainly bolstered their hopes and backstopped their opinions.

It's a fool’s errand to proclaim the current advance off the lows as a new bull market, because the S&P is up 20% off the low. It's silly to say this is a generational low. Not only are the valuations not indicative of great bear market lows, neither is the time. Moreover, great bear-market bottoms shows years of a plurality of bears outnumbering bulls, just as the mother of all bull markets had bulls outnumbering bears for years.
The bottom line: No one knows.
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