Interesting take over the weekend in Marketwatch on stock market bottoms relative to historic trendlines.In past bear markets, whenever equities as a group fall into the range of 40-42% below trend, at bottom was not far off.
HFN editor Peter Brimelow, along with ESR Research’s Edwin S. Rubenstein observe:
“We have looked at stocks relative to this long-term trend line. When we last looked, we found stocks were down 38% below trend, around the levels seen at historic bear market bottoms in 1981 (40% below trend), 1974 (41% below trend) and 1932 (42% below trend).”
The concept was developed via Jeremy Siegel’s Stocks for the Long Run. (Note: Siegel does not necessarily agree with their conclusions).
Brimelow and Rubenstein show the historic relationship between the two via this chart:
Stocks’ bottom in sight. Again.
They can’t go much lower before reaching unsustainable depths
Peter Brimelow & Edwin S. Rubenstein
Marketwatch, 9:28 p.m. EST Jan. 18, 2009