So is this the Santa clause/year-end/super-bear rally we've been waiting for? The S&P 500 has just gained 18% in the past five trading days. "Does it have legs," ask fund managers everywhere who are suffering from performance-anxiety attacks.
Well, we're currently in what I call a mid-cap rally, where mid-cap stocks outperform small-cap and large-cap stocks. Last time the mid-caps led the market we had a 70-day rally from March to May 2008.
Some say that the March rally had legs because it kicked off with a Lowry's 90-90 day on March 19th. However, the October rally had two 90-90 days on Oct 13th and Oct 28th; that rally turned out to be short-lived, lasting only 3 weeks. Clearly, 90-90 day was not the answer.
I recorded all the bear market rallies lasting longer than 1 day from both the 2000-2002 bear and the current bear.
|Start||End||Length (days) ||Leadership (overall)|
Average large-cap bear market rally = 17 days
Average mid-cap bear market rally = 36.5 days
Average small-cap bear market rally = 11.4 days
It appears that the average mid-cap rally lasts longer than the average large-cap or small-cap rally. Does someone have an explanation for why mid-cap rallies last longer? Otherwise, it could simply be a case of curve fitting.