Tuscan, AZ, July 05, 2010 --(PR.com
)-- The Dow Theory News letter identifies the new stock market status after a year of uncertainty. Over this last year the market has risen +70%, qualifying easily as a Bull market. The recent April-June decline of some 12-14% has not meet the definition for a Bear market, therefore the Bull market is assumed to still be intact, and at just over a year-old it is still a relatively young one. Still, the definition will tell the tale.
"Stocks tend to fluctuate," so said J. Pierpont Morgan, the famous 20th century investor, in one of history's great understatements. One look at the history of the Stock Market in the 20th and 21st Centuries confirms this. The stock market goes up (a Bull Market) and down (a Bear Market), but beyond that, Wall Street, quite unbelievably, has no universally accepted definition of either, and yet investors need to know where the stock market is in the bull/bear cycle.
The usual definition of a +20% gain for a bull market or a -20% loss for a bear market has a bit of a problem in that after a 20% loss it takes a 25% gain to break even. A more logical definition for a Bull market is when both the Dow Jones Industrial Average and the S&P500 Index have risen over +19%. When that threshold has been surpassed in the past, the stock market has then gone on to advance 95% of the time to over +29%. One-half have risen over 80%, with the average Bull market gain being +115%, and lasting nearly 3 years. Conversely, a Bear market is when both indices decline -16%, that has been the threshold where nearly 82% of the time declines then occurred of at least -21%. Nearly one-half (12 of 26) have dropped over -30% with the average loss for bear markets being -34% over a year and a half's time. It also happens that +19 and -16 are reciprocal numbers in that a +19% gain offsets a -16% loss, and vice versa.
About Schannep Timing Indicator & TheDowTheory.com Newsletter
Jack Schannep's Market Letter started in 1977 written for stockbrokers and colleagues at Dean Witter & Co (now Morgan Stanley). It first became available to subscribers on the Internet in 1998 and now has subscribers in most of these United States and 20 foreign countries. His interpretation of the Dow Theory did a better job of navigating the 2007-2009 bear market and subsequent bull market than any of the nearly 200 other stock market timing strategies monitored by the Hulbert Financial Digest. For more information, visit www.thedowtheory.com.