Twelve Year Lows ?

Twelve Year Lows Are Extremely Rare

Chart via JPMorgan


Thomas Lee, US Equity Strategy at JPMorgan writes: “Believe or not, retracing 12-year lows for the Dow is an incredibly rare event. Besides the retest of 1997 lows seen on Monday, this has only happened two other times, on April 8, 1932, and December 6, 1974.”

Given the rarity of the event, it is worth taking a closer look at the past instances: The 12 year low in 1932 was ~three months before the end of the bear market. In 1974, it was exactly the low for that bear market.

Dan Greenhaus of Miller Tabak adds, in both cases, “the economy continued contracting beyond the bear market bottoms; this is typical of rrecessions. Unemployment continued rising and GDP remained weak. The 1974 Bear market ended in December, but GDP contracted even in the Q1 1975 at a 4.7% clip — the worst GDP Q of that entire recession. Despite this, the Dow managed to rally 24.65%.”

Hitting a twelve year low is by no means is proof the bear market is over. And, two prior examples does not a sufficient sample make. Financial and housing sectors remain in a state of paralysis, and while substantial levels of stimulus are coming, eveer larger deficits are coming too.

Regardless, the oversold nature of the market, as well as the virtual straight down drop that brought us here, does present a real possibility of a strong market rally.


Dow up 150 so far. Will it have any legs? Discuss . . .

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