With the current Dow Jones Index up 52% from the March 2009 lows, let’s compare the current “Post-Crash” recovery rally to those of 1929 and 1938 to see of those periods can place our current rally into historical context.

Dow Jones 2009:  Up 52% in 28 Weeks (ongoing):

Dow Jones in 1938:  Up 62% in 31 Weeks

Dow Jones in 1929:  Up 53% in 22 Weeks

I’ve drawn Fibonacci retracement grids only as a reference.  Interestingly enough, the 1929 rally poked just above the 50% Fibonacci line while the 1937 rally stopped almost exactly at the 61.8% retracement.

The current 50% Fibonacci retracement (from peak to low) of the Dow Jones rests at 10,328.

The current rally has lasted six weeks longer than the 1929 rally, but is three weeks shy of matching the 1939 rally length.

In 1929, the stock market made a new low in October, 1939 (one year after the low of 200 was formed which is seen above) and then the actual low (of 51) was not made until July 1932.

In 1937, the stock market made a new low in April 1942 (five years after the low seen above was made) though the actual low (of 93) was made one month later in May 1942.

If history is a guide, then the stock market could have more upside – perhaps at least to the 50% retracement – but should we get there, it would be wise to begin monitoring the market much more closely instead of getting wildly bullish and optimistic.

As always “past performance does not guarantee future results” but history is certainly informative in putting current recovery rallies into context.

Corey Rosenbloom, CMT
Afraid to Trade.com

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