By one measure, the retrace from 252-day highs, this bear market has been mild in nature, politely reversing on a dime October 4 at the official -20% mark, currently registering a mild -7% (12/13/11).
For all the dramatic daily swings, even the VIX has remained within typical “event-type” range readings sub-fifty with today’s indication just a meek 25. However, I have begun to wonder about the third dimension, namely time.
To measure time in a bear market, I used the 200-day moving average of the S&P 500/ SPY back through 1994 as a benchmark in two simple ways to reduce noise.
The first was to measure the duration of instances where the 10-day moving average was below the 200-day moving average. The second was to measure the duration of instances where the 5-day simple moving average of the 200-day average was below its 10-day counterpart (i.e. the 200-day moving average was falling).
A histogram of the two approaches is provided below:
As shown, the two approaches resulted in 15-20 instances each including the current readings, highlighted in orange. While it’s hardly statistically significant, the purpose of this post is to show where we stand today, and it’s clearly well above past noise/ singular event instances of typically shorter duration, representing 80% of instances and averaging 10 to 20 days.
While I’m sure this comes as no surprise, the ‘thing’ to think about, is the admittedly small sample duration of the three major bear instances equities have faced during the near-twenty year period to the right, which ranged from twelve to eighteen months.
So here we are in ‘No Man’s Land’, but the next stop across the divide could be a protracted occurrence that we have only seen the beginning of. Is the market beginning to resemble the hooded figure in the film poster to you too?