A fascinating table and chart from Bespoke, comparing the “real” rallies since the Great Depression era. The argument is that we could hit a bottom lower than the lows we saw on March 9. The proof: Despite the four double-digit rallies between 1929 and 1932 all exceeding 20% with the longest happening for a period of 148 days where the index rose almost 47%, the broader market still saw a total decline of 86% between the years of ’29 and ’32. But the rally since the March 9 lows for this year has exceedingly surpassed the rallies from the GD period. After 165 days, the S&P has already risen 52%. So as Bespoke argues, the idea that we’ll fall lower than March 9 is a farther truth.
And the 86% decline, with 4 rallies in between that was seen in the GD era:
With a 51% rise already, some believe the rally isn’t over just yet. Got this from the Wall Street Journal report saying there’s a little more room for growth.
“There has been no evidence of deteriorating strength in each of the rally days this week, suggesting a continued healthy condition for the rally from the March low,” wrote Richard Dickson of Lowry Research in a Monday report referring to last week.
In past years, such a broad move for all indexes would typically be met by a wave of technicians calling the market “top heavy.” Not this time. Of more than a dozen technicians’ notes reviewed Monday morning, most echoed Mr. Dickson’s belief that the rally may still have room to grow.
So maybe we won’t fall again below the levels of March 9 but if this rally continues – a rise so quick so soon, aren’t we just setting up for a bigger correction? We’re already above a thousand and a 20 or even 30 percent drop, big as it may be still won’t bring us to the diabolical 666 level we saw on March 9. Another piece from the Journal puts together views of three analysts who were right about the bottom in March and two of them argue for a 15% correction to the downside. One of them is Jeremy Grantham, Chairman of GMO, a Boston asset-management firm.
Now, the chairman of Boston asset-management firm GMO and his colleagues say the S&P 500 has zoomed right past what they consider fair value of about 880, based on earnings estimates and historical price-to-earnings ratios.
Mr. Grantham sees “seven lean years” of a sluggish market ahead, to atone for what the firm believes was a long era of overpriced stocks, according to his newsletter.
The other analyst is Vinny Catalano, chief investment strategist at Blue Marble Research, who believes the fair value of the S&P falls to 945.
Read the rest here.