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History Shows Stock Market to Stay on Narrow Path

By    |   Thursday, 10 Mar 2011 08:21 AM

One thing I have concluded from my recent and past trading is that long-term cycles work when trading the stock market.

One reason I was able to turn bullish near the 2009 low in equities and stay bullish was because of where we were in the cycle.

In studying past market cycles, I found that there are 15-year to 20-year periods where equities do nothing or are stuck in long-term trading ranges. However, within these long-term trading ranges, there are large moves higher and lower.

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The 2008 crash in stocks was very similar to the 1907 panic and 1974 bear market. These crashes happened n the middle of long-term secular bear markets and all took about 50 percent off the value of the market. All were followed by about two-year rallies in which the market regained nearly all of its losses from the previous bear market (1907 to 1909 bull and 1974 to 1976 bull).

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Those rallies where followed by long boring periods where the market was in a tight range for a number of years (the 1909 and 1977 bear markets where only about 20 percent to 25 percent).

Therefore, rather that increased volatility we will probably see decreased volatility. And rather the Dow Jones Industrial Average swinging to 13,000 then to 7,000, we will probably see a much tighter range in the coming years, most likely in the 10,000 to 15,000 range.

Therefore, if you looking for large bull markets or some sort of crash, U.S. equities are probably not the place you are going to find such market action in. History tells us so.

About the Author: David Skarica
David Skarica is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He also writes the Gold Stock Adviser. Discover more by Clicking Here Now.


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DavidSkarica
One thing I have concluded from my recent and past trading is that long-term cycles work when trading the stock market. One reason I was able to turn bullish near the 2009 low in equities and stay bullish was because of where we were in the cycle. In studying past...
david,skarica,us,economy,stocks,djia,dow,industrials
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2011-21-10
Thursday, 10 Mar 2011 08:21 AM
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