Tuesday, August 18, 2009

Would history repeat itself.....






After 5 months of a rebound move (of over 52% in S&P500), we are at the higher end of the range in the current cycle....

Here's a chart which compares the current move in S&P to previous bear markets ...as is evident the 1929-42 depression bear market, went through multiple waves of strong moves in either direction, till the final low which was 89% lower than the high....

After a huge move from Oct 07-March 09 (i.e High of 1561 to low of 666 on S&P - a fall of 57%), the rebound has swiftly retraced 52% of the move..... We think the current move is overdone and its time for the market to take a breather... We are entering one of the most bearish period of the year - Sept & Oct. If the past record is something to go by, we expect the correction coming in early fall to be sharp and advise caution as markets enter this period....

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