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August 6, 2008

The 300-Point Bear Market Rally Thing

My friend Barry has up a post claiming (via David Rosenberg of Merrill) the following: 300-point Dow rallies only happen in bear markets. It's a great claim -- amusing, contrarian and fun -- but is it true?

It's a good spreadsheet exercise, so rather than giving the answer, I'll let readers puzzle it through. With some reasonable assumptions -- like what, precisely, is a bear market? -- see if you can truth check the 300-point claim.

And for extra points, broaden the definition and turn the 300-points into percentage terms. Does that change anything?

I'll post my answer later.

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