Bear Market, We Hardly Knew Ye

Investors and the financial press tend to think in 20% increments when it comes to judging market sentiment. That's the best way to explain the odd framing of bull and bear markets. Any 20% move down from a peak gets you a bear market; a 20% gain from a low gets you a bull. 

We've had lots of transitions from bulls to bears, and vice versa, over the years, but this week's sudden shift is nearly unprecedented.

The bear market that ended today lasted just 11 trading days. That makes it the shortest bear market in history. Keep in mind that the bull market that preceded it lasted 11 years. The bull market that starts today, meanwhile, is another rarity. It was born in just three days, counting from Monday's low. That gestation period is tied for the shortest ever, with a three-day period in October 1931. 

It's possible, of course, that we're seeing a bull market inside a much longer bear market. (Confused? I don't blame you.) That's what happened in the 1930s coming out of the Great Depression. Here's Nicholas Jasinski from today: 

The last time the Dow went from its bear-market low to a bull market in just three days was from Oct. 6 to Oct. 8, 1931. Then, as now, trading was extremely volatile, with big daily moves both to the upside and the downside.

And that bull market didn’t last long. By November 1931, the Dow was in a bear market again. The index didn’t bottom out until the middle of 1932, down an additional 60%-plus.

Some on Wall Street would argue we're not even in a bull market yet. Al Root notes the various ways of defining bulls and bears:  

The definition of a bull market, however, isn’t set in stone. Some think it’s a 20% rise off the lows. But that doesn’t always quite capture it. Some Wall Street pros like the market to set new highs. 

“New highs,” Benchmark analyst Mike Ward tells Barron’s. He would like to see new highs before declaring an end to the bear market. By that metric, the market is miles away from a new bull market. For instance, the Dow would need to rise another 7,000 points, or 31%, to meet that criteria. The S&P 500 would need to rise another 29%, and the Nasdaq Composite would have to gain another 26%.