Market Analysis
1966 Bear Market
The 1966 bear market started in February 1966 and lasted for only eight months with the market losing 24%. The bear market ended in October 1966.
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 1966 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 bear market on a 90-year chart with the S&P 500 index plotted as a bar chart with quarterly bars.
Chart 90yr: 1966 Bear Market
Chart by stockcharts.com
As can be readily observed from the long-term 90-year market chart, the 1966 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 1966 bear market on a 20-year chart with the S&P 500 index plotted as a monthly bar chart.
Chart 20yr: 1966 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 1966 bear market lower on concerns over the gross underestimate of the cost of the Vietnam War and the financial crisis that lead to the so-called credit crunch of 1966.
This was a short bear market that halted the preceding 1958-1965 bull market before the bull market briefly resumed again in 1967. The chart also reveals that the market would swing considerably over the next decade.
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 1966 bear market is shown again with a shorter time-frame on a 3-year chart plotted as a weekly bar chart.
Chart 5yr: 1966 Bear Market
Chart by stockcharts.com
The shorter time-frame provides more detail. As the chart shows, the 1966 bear market sold down quickly having lasted only eight months.
The 1966 bear market started in February 1966 and ended in October 1966 with the S&P 500 index losing 24%.
Market Chart: Rallies and Pullbacks
The 1966 bear market is shown again with a 3-year line chart and two moving average indicators.
Chart MA: 1966 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 February 1966 (noted on the chart with the 2nd RH - which stands for Relative High) and hit a bottom in October 1966 (the 2nd RL - Relative Low).
The 1966 bear market was a short one without any bear rallies. Looking at the chart it looks more like a severe pullback.
Bear market rallies are common place in bear markets where the market rallies to give investors false hope that the market conditions have improved, but just as quick as the rally started, it then quickly fades.
The 30% plunge is too much for this to be considered a pullback and it did last eight months - which is considerably longer than typical pullbacks.
The 1967-1968 bull market followed on from the 1966 bear market as the economy improved and GDP growth increased.