26.4.09

Shorter Than the Average Bear

Very few would argue that the recent market gains has stocks on the precipice of a new bull market, but by one standard, this hasn’t even reached the level of an average bear market, either.

Strategists at Strategas Research Partners point out that since the 1937 bear market, on average, bear markets have lasted 20 months, and the current one has been running for just 17 months. They date the beginning of the bear to Oct. 9, 2007, when the S&P peaked.

On another level, this bear has surpassed most. Through March 9, 2009, the S&P had lost nearly 57% of its value, a larger decline than any bear since the 1937-1942 bear market, which saw the S&P lose 60% of its value. That downturn’s length – 62 months – has not been surpassed since, with the next longest being the 37-month and 31-month bear markets that began in 1946 and 2000, respectively.

Strategas investment strategist Christopher Verrone, in commentary, says that the market’s sharp rally has been largely technical in nature, mostly the function of short-covering. Discretionary stocks and financials have led the way, and those sectors ranked first and second, respectively, in terms of sector short interest as a percentage of overall float.

“My concern would still probably be that, as we re-approach that 100-day [moving average] level of about 830, which is still another 6% to 7% from here, then you start to fade that rally,” Mr. Verrone says.

Investors are also looking at volume, which has been reasonably solid. Jamie Cox, managing partner at Harris Financial Group in Colonial Heights, Va., notes that “if you can keep volume high, then [the rally] will continue. Volume has been at a pretty respectable level, but it’s back-loaded, and most of it has come at the end of the day.”

After a worse-than-anticipated report from Automatic Data Processing on March payrolls, stocks slumped, but turned around on a better-than-anticipated report on manufacturing from the Institute for Supply Management.

http://blogs.wsj.com/marketbeat/2009/04/01/shorter-than-the-average-bear/

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