Market Analysis
1957 Bear Market
The 1957 bear market started in August 1956 and lasted for nearly one and a halve years with the market losing 22%. The bear market ended in December 1957.
Charts from stockcharts.com are used to analyze all of the market cycles that have occurred over the last ninety years. Analyzing the market cycles with charts gives stock investors a visual representation of how the stock market moves over time.
The S&P 500 index is the industry benchmark and is used to analyze the 1957 bear market and all market cycles from 1957.
The S&P 500 index was introduced to the stock market in 1957 and the index included back tested data to 1925 based on the historical prices of the stocks that made up the index. This provided historical data for comparison with the Dow Industrial Average.
90 Year Market Chart
The following chart shows the 1957 bear market on a 90-year chart with the S&P 500 index plotted as a bar chart with quarterly bars.
Chart 90yr: 1957 Bear Market
Chart by stockcharts.com
As can be readily observed from the long-term 90-year market chart, the 1957 bear market is just one of many bear markets that have occurred.
The 90-year market chart also shows an 80-quarters (20-year) simple moving average which has spent most of the last ninety years trending upwards. This shows that over the long-term the market has broadly continued higher as the moving average followed the S&P 500 index higher.
20-year Market Chart
The following chart shows the 1957 bear market on a 20-year chart with the S&P 500 index plotted as a monthly bar chart.
Chart 20yr: 1957 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 1957 bear market lower as the U.S. economy slipped into a recession (which increased unemployment and reduced corporate profits).
This was a short bear market that halted the preceding 1949-1956 bull market before the bull market resumed again in 1958.
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.
3-year Market Chart
The 1957 bear market is shown again with a shorter time-frame on a 3-year chart plotted as a weekly bar chart.
Chart 5yr: 1957 Bear Market
Chart by stockcharts.com
The shorter time-frame provides more detail. As the chart shows, the 1957 bear market initially sold down before a strong rally nearly drove the S&P 500 index back up to the highs when the bear market started. However, the rally faded and the market sold back down.
The 1957 bear market started in August 1956 and ended in December 1957 with the S&P 500 index losing 22%.
Market Chart: Rallies and Pullbacks
The 1957 bear market is shown again with a 3-year line chart and two moving average indicators.
Chart MA: 3yr: 1957 Bear Market
Chart by stockcharts.com
The above line chart for the S&P 500 index shows a 52-week (long-term) and a 12-week (short-term) simple moving average.
The 52-week moving average (purple line) followed the bear market lower.
The 12-week moving average (orange line) broadly identifies the rallies and pullbacks that occurred.
The stock market sold down heavily from August 1956 (noted on the chart with the first RH - which stands for Relative High) and hit a bottom in February 1957 (the first RL - Relative Low).
The S&P 500 index then made a strong rally attempt and almost reached the high from the start of the bear market. This rally would have given investors strong hope that this rally will continue and that the prior sell off was nothing more than a pullback.
But the rally did fail and the market sold down from July 1957 (2nd RH) until December 1957 (2nd RL) which was the end of the 1957 bear market.
The 1958-1965 bull market then followed.