No Bear Yet

The recent market decline has many analysts and traders alike calling for a bear market.  Birinyi Associates analyzed the current market correction (it will not be a defined bear market unless the S&P closes at or below 1252.12) and using the intra-day price of 1277.15 the market was 18.4% below its high close.  Looking at all 10%+ corrections since 1962, the average decline was -18% and lasted 136 days.  The average decline since the 1982 rally is 17% (16% ex '87).

1 Note that some corrections did result in a bear market.

Comments

[Vince]

I'd like to see how this chart would look if you measured corrections from new highs to the subsequent lowest point. For example, it doesn't seem meaningful that one correction ended 10/19/87 and another one began 10/21/87. Thanks

[Cleve]

Vince:
Thanks for the comment, I understand your concern. "The crash" in '87 was slightly unusual in that the market declined 20% followed by a two day gain of 14%. Just FYI, starting in 1990, the average decline for the displayed corrections has been -17.65% and lasted on average 90 days. So the '87 incident does not impact the overall picture very much.

[Vince]

My point is why break up a continuing decline into shorter periods? I'd like to see the full decline from the high to the low (until a new high is reached) measured as one correction. If you measure it that way, what happened, for example, in 2000 - 2003 is one correction of almost 50%. Thanks.

[BP]

I'm not sure how useful percentage declines are in identifying a bear market. A bear/bull market transition is simply a major trend change and thus lends itself to technical analysis very well. If you look at the major support levels held by the bull since '03 by all the critical indexes (metals, transports, etc.) you see that they have all been decidedly breached within the last month or two. And a cascading progression is evolving - what led us into the bull (small cap value, housing, and retail) were the first to roll over into a clear bear while metals, large cap, and other groups are following this lead. The general market will likely be where the retailers are now in a few months. Comparing a chart of the last bull/bear transition, the big tech companies and Nasdaq of 2000, to the center of attention in the current bull, consumer spending and the general market, you see very similar signs: a switch from a gentle climb to a steeper climb over the last year or so of the climb ('99 and '07) followed by a churning top pattern with a multi-year downtrending A/D pattern, and finally a sharp multi-year support level break.

[Mortgage Claims]

I'd like to see the full decline from the high to the low measured as one correction. If you measure it that way, what happened, for example, in 2000 - 2003 is one correction of almost 50%.
I'm not sure how useful percentage declines are in identifying a bear market. A bear/bull market transition is simply a major trend change and thus lends itself to technical analysis very well. If you look at the major support levels held by the bull since '03 by all the critical indexes.
Thanks you