Taking a look at Bespoke’s data for the ten best days in stocks since 1900, 4 are during a bear market, and 4 are near (or at) the market bottom. Where are we? (I have no idea). Interesting to note is 8 of the ten came during the 1929-1939 time period, and the only other one right after Black Monday.
(Click on the chart to enlarge. I did my best to eyeball the dates, so if they look a little off I apologize.)
Doesn’t your own data strongly suggest the best one-up days come during bear market rallys, thus forming a big part of the basis of your trading system?
Do we have more in common today with 1987 or the 1930s? I’m guessing 1930s — wholesale deleveraging, worsening fundamentals, consolidation and retrenchment following a period of rapid financial instrument innovation (i.e. new instruments rapidly deployed to the four corners of the financial universe without enough of a knowledge base to know their dangers). What are your thoughts?
I don’t think we are going back to the highs so it is more like the 1930′s. A huge engine of growth the last 5 years, excessive credit, is gone and will not be returning. Company’s will continue to deleverage causing a drag.
Please respond to the two questions in the 10.09.2008 “100% Cash” post comments.
My stock traders almanac shows eight of the ten best days for the NASDAQ came in 2000 & 2001 – well before the index bottomed out in October of '02. It seems safe to assume that these large up days are no more predictive than any other day. That they sometimes occur near the bottom of a bear market seems more likely due to chance than anything significant.
jon – Yes, 7 of these were when the market was below the 10 month SMA.
own – i’ll take a look, but if you have a q you want answered it is always better to email me, i don’t always look at the comments.