While this rally has been incredibly perplexing and excruciating for those who, gasp, expect markets to fluctuate, I wanted to see, statistically speaking, how out of the ordinary the run up since December 20th, 2011 has been.
Surprisingly, this type of rally is not totally out of the ordinary. From the end of the Tech Bubble collapse, I found 11 instances of “straight shot to the moon” rallies. The similarities of these rallies, and their subsequent corrections, are staggering. Almost all of the durations were around the 56 trading day range (roughly two to three months), almost all posted rally gains of 13% to 17%, and almost all corrected back 4% to 7%. Data this tightly correlated is fascinating to me.
While the bulls have had a spectacular run, this rally is historically run of the mill. As we are approaching the end of the average time duration I will be focusing almost exclusively on the bear side of trading as the corrections were very fast and only allowed for roughly two weeks of rip roaring sell-offs. Presented below is my data with the yellow indicating my projection for a coming correction.
