Wednesday, November 19, 2008

Less than 4% to go

On October 9, 2002, the bear market that deflated the tech/dot-com bubble reached its all time low, with the S&P 500 index closing at 776. Five years later to the day, the S&P reached its highest ever closing price of 1565, amounting to a 101% gain. Today the S&P closed at 806, which is less than 4% away from completely erasing the gains of that five-year bull market.

Something has to eventually shake up the emotions of investors, either positively or negatively, to get the market to move in the same direction for more than 10 days, and passing below the 2002 bear market lows may be just the catalyst. Such a dispiriting event could trigger a new group of investors to give up on stocks, drive the market even lower, and create the conditions for a rally with legs. Granted, this is simply hopeful speculation, but without any solid forecast to pass along, the next best thing I can do is describe possible scenarios.

4 comments:

Anonymous said...

It is amazing how a drop in 4% would be considered huge over 6 months just a couple years ago and now it is a daily occurrence. As a matter of fact, I think we just touched 776 earlier this morning.

Oleg

wooderson316 said...

Your knack is uncanny. If only you were contrarian to your own hesitation.

Jody said...

Wishing something to happen isn't the same as knowing it will happen.

wooderson316 said...

I know. I was being humorous about the correlation and not implying certitude. But the recent correlation is funny.