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Generational Dynamics Web Log for 20-Mar-2009
Enquiring minds want to know: How long will the rally last?

Web Log - March, 2009

Enquiring minds want to know: How long will the rally last?

Here are some "dead cat bounce" factoids from Credit Suisse, posted by the FT Alphaville site.

"Dead cat bounce" is the gruesome phrase used by investors to describe a brief rally that occurs during an overall bear market. As you might suspect, it's based on the observation that even a dead cat cat may bounce if dropped from a sufficient height.

Wall Street markets have been rallying, even since they reached a low point less than two weeks ago, on March 9. Everyone wants to know how long the rally will last.

During the period 1929-1932, the Wall Street markets fell 90%. However, during that four year period, there were several substantial rallies. Here's a list of them:

Start		End		Duration	Size of market increase
---------------	---------------	---------       -----------------------
Nov 1929	April 1930	5 months	49%
June 1930	September 1930	3 months	16%
December 1930	February 1931	2 months	25%
June 1931	July 1931	1 month		29%
October 1931	November 1931	1 month		35%
January 1932	March 1932	2 months	25%
--------------- ---------------	----------	----
AVERAGE				2 months	30%

So the market didn't fall steadily from 1929 to 1932. There were several rallies, one as long as 5 months. The average length of these rallies was 2 months.

Moving back to today, the market has fallen almost 50% since it peaked in October, 2007. During that time, there have been several rallies (I've updated the last line to the current date):

Start		End		Duration	Size of market increase
---------------	---------------	---------       -----------------------
26-Oct-07	10-Dec-07	45 days		 8%
10-Mar-08	16-May-08	67 days		12%
15-Jul-08	11-Aug-08	27 days		 7%
27-Oct-08	 4-Nov-08	 8 days		18%
20-Nov-08	 6-Jan-09	47 days		24%
09-Mar-09	19-Mar-09	10 days		16%
--------------- ---------------	----------	----
AVERAGE				34 days		14%

So for those of you wondering how long this dead cat bounce will last, it might be over already, or it might last several more weeks. We won't know until after it's over.

(Comments: For reader comments, questions and discussion, as well as more frequent updates on this subject, see the Financial Topics thread of the Generational Dynamics forum. Read the entire thread for discussions on how to protect your money.) (20-Mar-2009) Permanent Link
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