Wry & Dry

What's in a name? That which we call a rally...

Wry & Dry is a romantic, astounding as that may seem to some readers.  A bunch of roses (preferably yellow) is all it takes for the heart to swell.

And so, still submerged in the tide of Valentine's Day, W&D's mind wandered to The Bard to try to link romance and the gloomy share-market.  And found nothing.  Well, almost: "What's in a name?  That which we call a share-market rally by any other name would smell as sweet..." [1].  

Last week the share-market approached a 20% fall from its 27-Apr-15 peak.  Today, that fall has shrunk to 16%.  

Is this little 4% boost The Rally?

In the absence of anybody ringing a bell to say that the market trough has passed, W&D will firmly observe that... he has no idea.  Which is hardly surprising, not because it's after lunch on a Friday, but because history shows that short share-market rallies, some large, happen in a falling market.   And do not signify the market trough.

No one rings a bellConsider, painful as the memory might be, the 351 business days from the peak of the share-market in Nov-07 to its trough in Mar-09.  The market fell some 55%.  But during that fall there were each of 29 days when the market rose by 2% or more.   In fact there were 11 days of greater than 4% rises.  Did any of those mini-rallies give a hint that the market trough had passed?  Nuh.

In fact, after the 6-Mar-09 trough, the market rose by 14% by the end of the month, but with only one day having a rise greater than 3%.

W&D's point is that short-term rallies do not tell you anything.  Readers will not know that the trough of the current market downturn has passed until about six weeks later.  

And, obviously, then it's too late to get back into the market.