History of Bear Markets

Bear of 1901-03 Dow dropped 49% in 29 months Bottomed in Nov 1903 1st leg up was 54% in 7 months Then corrected 10% in 1 week 2nd leg up was 27% in 4 months Bear of 1973-74 S & P 500 dropped 50% in 21 months (after false start) 1st leg up was 51% in 7 months Then corrected 16% in 2 months 2nd leg up was 33% in 12 months

Bear of 1906-07 Dow dropped 49% in 22 months Bottomed in Nov 1907 Finally leg began in Feb 1908 1st leg up was 71% in 19 months Then corrected 27% in 10 months 2nd leg up was 17% in 3 months

Bear of 2000-02 Nasdaq dropped 78% in 31 months (after tech bubble burst & 9/11) 1st leg up was 72% in 11 months (after rebound began in March 2003) Then corrected 19% in 7 months 2nd leg up was 25% in 4 months

Bear of 1919-21 Dow dropped 47% in 22 months Bottomed in Aug 1921 1st leg up was 61% in 14 months Then corrected 10% in 1 month 2nd leg up was 15% in 4 months

Bear of 2007-09 Nasdaq dropped 56% in 17 months (after housing bubble burst) 1st leg up was 81% from March low Now (as of 12/31/09) 3 of 4 major indexes have yet to suffer a 10% correction

Bear of 1929-32 History Lessons: Dow dropped 89% in 34 months 1st leg up was 101% in 2 months Then corrected 39% in 6 months 2nd leg up was 122% in 4 months 1. Be ready to play defense (sometimes 2nd leg failed to make new high). 2. Keep expectations modest. In most cases, 2nd leg gain was smaller than 1st legs surge! 3. History repeats itself. But can be dynamic and wrong conclusions can be made. 4. Main lesson is: you are best off heeding the market itself and stay flexible. 5. Watch 20, 50 and 200 day SMA (simple moving averages) related to equity price. Price dropping below 20 and 50 may indicate heading lower.

Bear of 1937-38 Dow dropped 50% in 13 months as Great Depression and rumors of war persisted 1st leg up was 63% in 7 months Then corrected 24% in 6 months 2nd leg up was 31% in 5 months Did not reach its previous high