Rallies Following 30% Bear Corrections (1900-Present)

Last weekend, I showed a chart titled Stock Market Rallies Since 1900. The metrics were “rallies that followed a major Dow correction defined as a decline of 15% or more. By that definition, the last Dow correction ended on October 3, 2011 with a decline of 16.8%.”

A few readers thought that was too restrictive, so I contacted the folks at the Chart of the Day, and they were kind enough to redraw the chart using 30% declines as a basis:


Source: Chart of the Day


The chart above includes all major market rallies of the last 111 years. Each dot represents a major market rally as measured by the Dow. Dates mark the year in which the rally began.

For today’s chart, however, a rally is being defined as an advance that follows a 30% decline (i.e. a major bear market).

There have been 13 major rallies over the past 111 years which equates to an average of one rally every 8.5 years. It is also interesting to note that the duration and magnitude of each rally correlated fairly well with the linear regression line (gray upward sloping line). As it stands right now, the current Dow rally that began in March 2009 (blue dot labeled you are here) would be classified as well below average in both duration and magnitude.

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