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The 50% Retracement Level
A Look at Nine
Stock Market Indices
by Ron Griess
Proprietor, The
Chart Store
www.thechartstore.com
July 27, 2004
Comments: One of the rules of stock markets in the past was to expect reactions in and around the 50% retracement level of bear market declines. In this Observation, we look at nine stock market indices to see what has happened this time.
The following charts illustrate the “bear market” decline for nine indices and the ensuing rally from the lows. Each chart has a summary table of the high, low, point decline, % decline and a calculated price to represent the 50% retracement level. The red line on the left represents the decline, the green line on the right represents the calculated 50% retracement level. Weekly charts are shown through July 23 and monthly charts through June.
Summary Points:
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The dates of the bull market highs vary from as early as April, 1998 for the Value Line Geometric to as late as April, 2002 for the S&P MidCap.
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All but one index, the Dow Jones Transportation Average (DJTA), bottomed in October 2002. The DJTA bottomed in March 2003.
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The worst performing index from top to bottom was the NASDAQ 100, down 83.5%.
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One index, the S&P MidCap has taken out its old high. Another index, the Russell 2000 rallied to with a point or so of its old high.
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All but the NASDAQ 100 and NASDAQ Composite have exceeded the 50% retracement level. Two of the broadest indices, the S&P Composite and Russell 1000, have only slightly exceeded their 50% retracement levels.
© 2004 Ron Griess
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