BMB mentioned this article in the comments section of an earlier post, but I thought I’d bring it to the front page in case more folks were interested in checking it out.
Earlier this week, at Financial Sense Online, market technician Frank Barbera took a look at the current market rally off the ‘02-’03 lows, and put it in some historical perspective in terms of its duration and lack of volatility. Here’s a ‘fer instance’:
Never, and I mean NEVER, have we seen a four year bull run extend outward without at least a 10% decline somewhere in the mix. That is the challenge we face in 2007, as I will end with this final chart showing 100 years of the DJIA and a final Time Span chart–this time, a Time Span that tracks 10% corrections in the Dow. In the past 100 years, we have now gone the longest period of time – thru today, a total of 959 trading days in which the DJIA has not seen a pull back of at least 10%. That has never happened before with this current streak easily dwarfing the prior long dated runs on 839 days in 3/30/1994, 806 days ending on 10/13/87, and 772 days ending on 6/09/53.
As I said earlier in this piece, this is the most over-extended stock market, and probably one of the most over-owned and uncorrected stock markets history has ever delivered. For those of you who like Presidential Cycles and are feeling lucky (and I wish you good luck in 2007), something tells me that against this type of stacked deck, you’re gonna need it. Seldom, if ever, has risk premium been this low, and perceived risk, this obfuscated. History says 2007 should favor a Return of the Bear.