Dow Jones: Why 5% Rallies Aren’t a Good Sign
Tuesday, March 10, 2009 15:35News of a leaked memo by Nationalized Citigroup CEO Vikrim Pandit sent the markets soaring 5% today. The memo states that Citi is profitable for the year. We’ll wait and see if Mr. Pandit’s optimism makes its way to the company’s next earnings release. Judging by previous and similar such statements by Citigroup’s CEO, we have our doubts.
The 5% rally has already brought some bulls from out of their shadows but we believe that todays movement was nothing more than an oversold bear market rally.
Bear markets are notorious for violent countertrend upwards corrections. The fact is that 5% upwards moves don’t happen in bull markets. Almost all of the top 10 daily percentage gains in the Dow Jones happened during some of the worst years for the market. 7 occurred during the great depression, 2 in the second great depression of 2008, and 1 in October 1987, after the crash.
During the last “Bull” market of 2003-2007, the largest single percentage daily gain was 3.59% on March 17, 2003. Todays 5% jump is actually NOT a good sign and is consistent with a bear market correction.
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Glenn says:
March 10th, 2009 at 3:48 pm
I’ve seen rallies like this several times over the past year, and they never last more than a few days.
The Federal Reserve’s Permanent Operations from today show some interesting activity indicating Fed intervention. Always keep an eye on central bank intervention, especially in our insanely manipulated markets.
Jeffry Pilcher says:
March 10th, 2009 at 4:33 pm
The good news is that this gives us another 300+ points to fall before the crash continues.
tina says:
March 10th, 2009 at 7:58 pm
yeah usually a 500+ points on a week lead to a 700+ point DECLINE the next week..not to bullish yet..
Stocks: Oversold Rally Will Soon be Tested | Charting Stocks says:
March 12th, 2009 at 4:07 pm
[...] Dow Jones Industrial Average rose almost 240 points (3.5%) today. As mentioned in a previous post, large daily percentage gains are more consistent with bear markets than bulls. Todays rally was [...]
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