Market Analysis
1917 Bear Market
The 1917 bear market started in November 1916 and lasted for around a year with the market losing around 40%. The bear market ended in December 1917.
Charts from stockcharts.com are used to analyze all of the market cycles that have occurred over the last hundred years. Analyzing the market cycles with charts gives stock investors a visual representation of how the stock market moves over time.
The Dow Industrial Average is used to analyze the 1917 bear market and all market cycles prior to 1957 (The S&P 500 index was formed in 1957 and all market cycles from 1957 are analyzed using the S&P 500 index).
100 Year Market Chart
The following chart shows the 1917 bear market on a 100-year chart with the Dow Industrial Average plotted as a monthly bar chart.
Chart 100yr: 1917 Bear Market
Chart by stockcharts.com
As can be readily observed from the long-term 100-year market chart, the 1917 bear market is just one of many bear markets that have occurred.
The 100-year market chart also shows a 240-month simple moving average which has spent most of the last century trending upwards. This shows that over the long-term the market has broadly continued higher as the moving average followed the Dow Industrial Average higher.
20-year Market Chart
The following chart shows the 1917 bear market on a 20-year chart with the Dow Industrial Average plotted as a monthly bar chart.
Chart 20yr: 1917 Bear Market
Chart by stockcharts.com
A 12-month simple moving average is also plotted on the 20-year market chart. The 12-month moving average is a useful indicator used in Technical Analysis for highlighting market cycles. As the 20-year market chart shows, the 12-month moving average followed the 1917 bear market lower.
Most investors new to the stock market are under the impression that the stock market only moves in the direction of the current market cycle.
In reality, the stock market moves in cycles and alternates between bull markets (where stock prices broadly increase) and bear markets (where stock prices broadly decline).
Fortunately for investors, bull markets are usually longer than bear markets. This means that stock prices spend more time increasing in value than they do losing value.
Bull markets last anywhere from two years to around a decade, whereas bear markets are shorter and usually last a year or two and sometimes three.
2-year Market Chart
The 1917 bear market is shown again with a shorter time-frame on a 2-year chart plotted as a weekly bar chart.
Chart 2yr: 1917 Bear Market
Chart by stockcharts.com
The shorter time-frame provides more detail. As the chart shows, the 1917 bear market started in November 1916 and lasted for a year. The Dow Industrial Average lost around 40% during this period.
The 1917 bear market occurred during World War I which started in July 1914 after the assassination of Archduke Franz Ferdinand.
While the Dow Industrial Average lost around 40% during the 1917 bear market, it still finished higher than the start of the 1915-1916 bull market. However, the 1917 bear market still finished slightly lower than the market level when the stock market closed in July 1914 as World War I began.
Market Chart: Rallies and Pullbacks
The 1917 bear market is shown again with a 2-year line chart and two moving average indicators.
Chart MA: 1917 Bear Market
Chart by stockcharts.com
The above line chart for the Dow Industrial Average shows a 52-week (long-term) and a 12-week (short-term) simple moving average.
The 52-week moving average (purple line) flattened first before finally sloping downward as the bear market intensified and dropped lower in June 1917.
The 12-week moving average (orange line) broadly identifies the rallies and pullbacks that occurred.
The stock market initially sold off in November 1917 and is noted on the chart as RH (which stands for Relative High). This November market high saw an end to the 1915-1916 bull market. The market sell down continued until February 1917 and is noted on the chart as RL (Relative Low).
The Dow Industrial Average then rallied until June 1917 (the 2nd RH on the chart). These rallies are commonly referred to as bear market rallies as they give investors a false impression that the bear market has bottomed and the next bull market started.
The market then plunged lower following the bear rally to bottom in December 1917 (the 2nd RL on the chart) and this was the end of the 1917 bear market. The 1918-1919 bull market then followed.