Sep

5

Along the lines of generational length of market regimes, I used DJIA daily closes to look at wait times between new 10 year highs (actually 2500 trading days). From the present back to 1928, each day looks back over the prior 10 years to see if it is a new high, and if so how many days has it been? Here is a graph of these results.

The bands of points cluster along two intervals (bull markets) when new 10 year highs were being set frequently: 1950-65, and 1982-2000. Notice there are gaps between the intervals, which represent the intervening bear markets of 1929-50 and 1965-82. During these bear periods, new 10 year highs were set infrequently (duh the market wasn't going up), so you see points during these periods representing many days. The longest was over 4000 days, and occurred in 1945, followed by 2500 in 1982, and 1677 in 1972.

Interestingly the current period (through 9/1/06) has not seen a new 10 year high for 1667 days (I put a point there to illustrate this, even though we have not yet seen the new 10Y high). So in 10 days, assuming the DOW does not jump over 300 points (i.e. youtube video of sniping Osama with a 50 cal. in slo-mo), we will be in the third longest wait since the 1930's!

Who cares? Perhaps these many-year length intervals are related to generational risk-aversion and memory of losses and ruin, which go on vacation when a new generation's pockets fill up. If the size of the gaps between bull markets has such consistency, the gap we are now in may have a number of years to go.


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