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Post Massive Bear Market Rallies

Here is an interesting chart that illustrates what happens to indices after a massive bear market.  A “massive bear market” is defined as a decline of greater than 50%.  There have been only three massive bear markets since the Dow’s inception in 1896.  

It’s interesting that for the post-massive bear market rallies that began in 1942 (green line) and 2002 (grey line), a major correction began after 1,200 to 1,300 trading days had passed.  The post-financial crisis rally is currently over 1,300 trading days old.  This may signal that the Dow is overdue for a correction like many analysts have predicted.  Keep an eye on the markets as the Fed continues to wrestle with key decisions relating to bond buying and interest rates.