The TRUTH About Dow's Recent So-called Biggest One-Day Jump

A false sense of security will give way to a bearish reality.

The Wall Street Journal's "Dow Soars More Than 11% in Biggest One-Day Jump Since 1933" was inaccurate.  It should have read since "1929".  The Dow Jones industrials composite index had its best one day and three-day percentage gains since 1929 and 1931, respectively. The gain of 21.3% for the Dow's three-day rally that ended on March 26th was the index's second-best since 1901. The one-day gain of 11.4% on March 24 ranks as the Dow's fourth-best day since 1901.

To understand the significance of the error, read on.

Nine of the top ten three-day percentage gainers occurred during the first four years of the 1929 to 1949 secular bear market. The five rallies which occurred before the 1929 crash reached its final bottom on July 8, 1932, all failed. Their post-rally declines ranged from 19% to 82%.

Six of the 10 biggest daily percentage increases in the table below for the Dow over the last 120 years occurred from 1929 to 1933.  There were two 2008 secular bear market rallies, October 13 and 28, 2008, among the top ten one day wonders. The losses for both of the one-day 2008 rallies at March 2009 were 31.1% and 28.7%, respectively.        

Of the 100 best percentage gain days for the Dow since 1901, 29 of them occurred between the post 1929 crash and the final July 1932 bottom.  From the 1932 bottom to the end of 1933 accounted for an additional 23 of the 100 best days. All of those rallies were profitable. From the low to the end of 1933, the Dow increased by more than 100%.  The only other period or year which had concentrated representation in the top 100 was 2008 which had seven.

The Wall Street Journal's error is significant since 100% of the top 100 best one day rallies from:

  • October 1929 to July 1932 bottom failed

  • July 1932 bottom to end of 1933 were successful.

False Sense of Security From a Very REAL Bear

The error has created a false sense of security.  From my preliminary empirical research findings, there were only seven bull market rallies within the top 100 one day percentage gainers. Three of seven were represented by 1987 and two by 2009.

To understand why the 2009-2020 secular bull, unlike the 1982-2000 secular bull, will not resume, read my two March 2020 articles below. The crash does not share the genealogy of the Dow 1929, Nasdaq 2000 and 2020 crashes for the markets of the U.S., Japan, Germany, Canada, France, and South Korea which are now underway.   

Based on the findings from my empirical research the probability is 94.4% (17/18) that the Dow 2020's one day and three-day top ten percentage gainers last week were bear market rallies. Many are hopeful that the correction that has been underway since February 20, 2020, is just a break in the continuation of the secular bull market which began in 2009. Based on my just concluded empirical research of the Dow's best daily and three-day gains and my previous findings from my prior statistical crash probability analysis the probability is 99% that the markets will continue to crash. My deep fear is that the world is on the verge of a 1930s-style economic depression. Everyone should be prepared to take advantage of the Bear market rally that is currently underway to exit the market by today, March 31, 2020. The reason why I believe that the three-day 03/24/20 to 03/26/20 rally produced the largest percentage gain since 1933 is because of the calendar. 

The first quarter of 2020 ends on Tuesday, March 31. The date is important for two reasons:

1) Many financial services companies and mutual funds, etc., are known to aggressively bid up the share prices for the companies they hold at the end of a month or a quarter.  The fee that most mutual funds and money managers receive consists of a percentage of the value of the assets under management on the last day of a month or a quarter. 

2) Most pension funds have mandates which require them to rebalance their stock and bond allocations at the end of every quarter.  Due to the extreme declines for stocks since December 31, 2019, they will be selling bonds and buying stocks.   

For the above reasons, the markets are likely to close higher on March 31, 2020. The decline will likely resume on April 1, 2020. According to the Statistical Crash Probability Analysis (SCPA) forecast the probability is 100% that the markets will make new lows by April 30, 2020.   For more about the SCPA click here for access to all of my 2020 crash-related articles.      

Serious consideration should be given to liquidate everything but shares under $5 by March 31, 2020.  The SCPA which has been very accurate (click for SCPA track record) is forecasting that the probability is 100% for the relief rally to peak by April 8, 2020, and for the markets of the six countries to reach new lows by April 30, 2020. The SCPA is also forecasting the probability is 100% for the coming key events to occur for the crash of 2020: 

  • Interim bottom by or before May 4, 2020

  • At interim bottom, market will be 41% to 44% below 2020 highs

  • Post-crash high before the journey begins to final Q 4 2022 bottom will occur from June 24, 2020, to September 18, 2020.

  • Post-crash highs to get market to within 17% of 2020 highs.

An Argument Against the SPCA 

My only argument against the SCPA's statistical probability analyses is can the markets get back to above or even to their March/April 2020 post-crash relief rally highs? The simultaneous crashes in multiple markets for more than one country, let alone six countries, is historically unprecedented. My hunch is that the damage to the markets and economies of the world's leading developed countries will be much more severe than the damage caused by the 1929 crash. The relief rally highs could prove to be the post-crash highs. If that proves to be the case, according to the SCPA, the probability is 100% that it will take the markets a minimum of 15 years to get back above the highs already made by the relief rally and longer to get back to their post-crash highs. Additionally, the findings from my extensive research on all of the secular bear markets since 1929 further support the SCPA's forecast.

There are only three reasons why anyone who is reading my articles would not sell:  

1. Waiting to get back to break even. It's against human nature to take losses.  

2. Not wanting to pay capital gains. Securities with gains can be "sold short against the box" to delay a taxable capital gain.

Financial advisor advising otherwise. 

BEWARE of the following:

a) An advisor's largest percentage fee that can be charged is for the amount that an investor has in stocks.  If the investor is in cash the advisor can-not charge the fee. 

b) The majority of financial advisors are affiliated with big brand name firms including Merrill Lynch, Morgan Stanley, Goldman Sachs and UBS, etc.  These advisors have to follow the party line. They do not have the independence to get their clients out of the market even if they wanted to. 

c) The financial advisor industry utilizes propaganda to get clients to remain invested during volatile periods.  Read "No One Saw It Coming' – Should You Worry About The 10-Best Days" by Lance Roberts.  He is among a few of the independent advisors who I know which had his clients out of the market.   

The biggest reason to get into cash immediately is that the returns from deploying a secular bear market investing strategy from now through the end of 2020 could potentially be off the charts. Read my March 31, 2020, article entitled "Embrace the Bear" to find out about how and why returns in a bear market can be very lucrative.    

Run From the Bear!

Everyone needs to tell all of their friends and family to get out of the market. If they resist, send them to https://bullsnbears.com/crash-of-2020/ to read all of my 2020 crash articles. Also, everyone needs to sign up to be alerted to whenever I post another crash article.

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