More Money Blog

I was browsing some stock trading forums over the weekend to see what people are thinking about where the market is heading and I found some interesting charts. Here is one that shows previous and bad bear market declines.

The blue one is the current bear market and the gray one that goes way down to -89.2% is the great depression. 

The decline in the market has recently hit a point that is about equal to bad previous bear markets. As you can see in the green and red, once the market reached about a 50% decline it was the bottom. 

What is also obvious in this chart is that we have reached this point in near record time. So if this bear market is in the process of coming to an end, it will be a rather short bear market. Another thing that I noticed from this chart is the steep -47.9% decline that happened in 1929  looks very similar to the decline that we recently saw in October and November of 2008. One last thing to note is that the market often retests the lows (as seen in the green and red) once the recovery rally has started. This is an excellent time buy into the market, on the retests. As long as we aren’t heading for another great depression, this should be a sure strategy to get back into the markets and very low levels.

The chart is from dshort.com, they also have a lot of other really neat charts. Be sure to check it out.