Extraordinary Chart Of Four Bad Bear Markets -Hard Not To Think The Worst Is Over

Posted by Richard Russell - Dow Theory Letters

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Partial comment from the lengthy daily comment by Richard Russell of Dow theory Letters. One of the best values anywhere in the financial world at only a $300 subscription to get his report daily for a year. http://ww1.dowtheoryletters.com/ CLICK HERE to subscribe

I’m going to start with an extraordinary chart constructed by dshort.com. The chart follows the S&P 500 through four major bear markets. The deep blue line is the current bear market. Note that at the March 9 low the S&P had lost 56.8% of its value. This makes the current bear market the worst since the great bear market of the 1930s. You can see where we are in terms of the 1930s bear market, shown on the chart in grey.


Now here is important information. I researched every bear market since the ’30s. Without an exception, following the bear market low and the initial bull market rally, each new bull market saw some sort of test or approach to the initial lows (in the current case, the low would be the March 9 low of Dow 6547). Therefore, the odds based on past performance are that the Dow will decline to test or approach the March low of Dow 6547.

If Dow 6547 is tested successfully (in other words, if the Dow doesn’t go lower), and if the next rally surpasses the most recent Dow high (which, so far, is 8083) I would say that the odds are high that a bull market is in force. Note on the chart below, that this bear market is, so far, the shortest in duration of the other three, although the current bear market is already as intense as the 1929-32 affair.


The 84 yr. old writes a market comment daily since the internet age began. In recent years, he strongly advocated buying gold coins in the late 1990’s and 2000 below $300. His position before the recent crash was cash and gold.
There is little in markets he has not seen. Mr. Russell gained wide recognition via a series of over 30 Dow Theory and technical articles that he wrote for Barron’s during the late-’50s through the ’90s. Russell was the first (in 1960) to recommend gold stocks. He called the top of the 1949-’66 bull market. And almost to the day he called the bottom of the great 1972-’74 bear market, and the beginning of the great bull market which started in December 1974. He loaded up on bonds in the early 80’s when US Treasuries where yielding 18%.
The above is a partial comment from the lengthy daily comment Richard Russell writes. One of the best values anywhere in the financial world at only a $300 subscription to get his report daily for a year. HERE to learn more.