100 Year Dow Jones Industrials Chart
Have a look at this 100 year (actually, 105-Year) chart. I colored each "Market" appropriately -- Green for Bull, and Red for Bear -- to more clearly show what happens.
Bull markets get ahead of themselves. At their ends, they tend towards excesses that take a very long while to recover from.
When a long Bull runs end, it takes quite a while before the next one begins. Some of this is related to the destruction of capital crashes cause; Much of it has to do with the psychological damage suffered by investors. As we have seen more recently, that damage -- plus 46 year low interest rates -- helped push former market investors into real estate. We have yet to see their unbridled love affair with sotcks rekindled. What will be the catalyst to get them back into equities? My best guess is a sustained move upwards.
Regardless of the actual cause, in the past century, every Bull Market has been followed by a significant refractory period. From the looks of the time-lengths of red, it appears almost generational in nature. The damage is repaired when a new crop of investors -- without crash scars -- finally appears.
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Is it possible that an 18 year Bull market (1982-2000) could be followed by a 2 1/2 year Bear (March 2000 peak to October 2002 low), and then launch into another multi-decade (2003-2018) Bull? Sure, anything is possible. But as the chart above plainly shows, it would be historically unprecedented.
One other thing worth noting: The steepness of the gains from 1924-1929 are very much parallel to the 1996-2000 moonshot. Both ended with near 80% drops (Dow for 1929, Nasdaq for 2000).
It took 25 years -- until 1954 -- for the Dow to regain its 1929 highs. I don't believe it will necessarily take that long for Nasdaq -- but I am aware of the outside possibility.
In India
Sensex retraces 10000-mark
MUMBAI: Snapping its three-day losing spree, the Bombay Stock Exchange sensitive index (Sensex) regained the 10000-mark on Monday on buying support in IT and banking stocks, though a cut in short-term lending rate by the Reserve Bank of India did not exactly trigger a selling spree as was widely expected.
After breaching the crucial 10,000-mark at the opening, the Sensex settled at 10223.09, a rise of 247.74 points, or 2.48 per cent against 9975.35 last Friday.
The selling pressure in the last three days saw Sensex losing a hefty 1508 points, or 13 per cent, and plunged to below the 10000-level on Friday. The 50-share Nifty of the National Stock Exchange also gained 48.45 points or 1.58 per cent to close at 3122.80. Marketmen attributed the early rise to firm trends in Asian and European bourses.
The Sensex touched a high of 10538.05 but dropped to a low of 10023.28 soon after the announcement about RBI’s rate cut. Brokers said hectic buying by domestic institutional investors was alternated by profit selling.
Elsewhere, Asian indices ended up by about 2-5 per cent while European markets were up by about 2 per cent in morning trading.
U.S. stocks rallyU.S. stocks rallied on Monday on signs of easing credit and after Federal Reserve chief Ben Bernanke threw his support behind another stimulus package to kick-start the economy. The Dow Jones Industrial Average leapt 127.04 points (1.44 per cent) to 8979.26 in early trading. The Nasdaq composite index edged up by 3.51 points to 1714.80 and the Standard & Poor’s 500 index climbed 12.80 points (1.36 per cent) to 953.35. — Agencies
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