8th Bear Market Rally Since October 2007

Merrill Lynch’s David Rosenberg notes that last week’s pop was the eighth bear market rally since October 2007.

As the chart below shows, they have ranged in strength from ~8% to over 24%.

Each one was treated (“enthusiastically”) as if a bottom had been made. Each one saw a subsequent lower low, excepting the most recent one that ended Friday.

These included:

  1. The TAF (S&P 500 at 1500)
  2. January 75 bp rate cut (1325)
  3. The Bear Stearns deal in March (1270)
  4. The fiscal package in April (1200)
  5. The GSE conservatory in July (1200)
  6. The TARP in October (1180)
  7. Pre-election Rally (840)
  8. The Citi bailout in November (750)

Rosenberg added late Sunday:

This is now a five-day rally that has seen the S&P 500 surge 19%. Then again, we did see a 7-day rally tally up to 18.5% from late October to early November. And before that a 4-day rally in mid-October that netted equity traders an 8.5% spike. What is happening is that the bear market rallies are getting shorter and more flashy – but they are still bear market rallies. The ones we have seen thus far in this bear market have seen the S&P 500 rise nearly 10% and last 18 days on average. These are rallies, in our opinion, that investors should using as an opportunity to sell into.


Bear Market Rallies, October 2007 to November 2008

chart courtesy of FusionIQ, Bloomberg

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