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100 years of Market Cycles

Market Analysis


1942-1946 Bull Market

The 1942-1946 bull market started in April 1942 and lasted for four years gaining around 120%. The bull market ended in June 1946.

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 1942-1946 bull 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 1942-1946 bull market on a 100-year chart with the Dow Industrial Average plotted as a monthly bar chart.

Chart 100yr: 1942-1946 Bull Market

The 1942-1946 bull market on a 100-year chart for the Dow Industrial Average plotted as a monthly bar chart.

As can be readily observed from the long-term 100-year market chart, the 1942-1946 bull market is just one of many bull markets that have occurred.

The 100-year market chart also shows a 240-month simple moving average which has spent most of the last hundred years 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 1942-1946 bull market on a 20-year chart with the Dow Industrial Average plotted as a monthly bar chart.

Chart 20yr: 1942-1946 Bull Market

The 1942-1946 bull market on a 20-year chart for the Dow Industrial Average plotted as a monthly bar chart.

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 1942-1946 bull market higher.

The 1942-1946 bull market started shortly after America entered World War 2 due to the bombing of Pearl Harbor in December 1941. The bull market continued through the war and ended nine months after the war ended. The peak of this bull market surpassed the top of the 1932-1936 bull market.

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.

5-year Market Chart

The 1942-1946 bull market is shown again with a shorter time-frame on a 5-year chart plotted as a weekly bar chart.

Chart 5yr: 1942-1946 Bull Market

The 1942-1946 bull market on a 5-year chart for the Dow Industrial Average plotted as a weekly bar chart.

The shorter time-frame provides more detail. As the chart shows, the 1942-1946 bull market started in April 1942 and lasted for four years. The Dow Industrial Average gained around 120% and the bull market continued for the remainder of World War 2.

Market Chart: Rallies and Pullbacks

The 1942-1946 bull market is shown again with a 5-year line chart and two moving average indicators.

Chart MA: 1942-1946 Bull Market

The 1942-1946 bull market on a 5-year chart for the Dow Industrial Average plotted with a line chart and two moving average indicators.

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) broadly slopes upward following the bull market.

The 12-week moving average (orange line) broadly identifies the rallies and pullbacks that occurred.

The first rally started the bull market in April 1942 which was a few months after America entered World War 2 following the bombing of Pearl Harbor. The start of the first rally is noted on the chart as RL (which stands for Relative Low). This rally progressed until July 1943 and is noted as the first RH (Relative High).

The market then pulls back, bottoming in November 1943 (the 2nd RL on the chart). From here the market rallied and picked up momentum in September 1945 when the war ended.

The rally finally ended in June 1946 (2nd RH) which saw an end to the 1942-1946 bull market. The 1947-1948 bear market then followed.