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100 years of Market Cycles

Market Analysis


1977 Bear Market

The 1977 bear market started in January 1977 and lasted for just over a year with the market losing around 20%. The bear market ended in February 1978.

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 1977 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: 1977 Bear Market

The 1977 bear market on a 90-year chart for the S&P 500 index plotted as a bar chart with quarterly bars.

As can be readily observed from the long-term 90-year market chart, the 1977 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 1977 bear market on a 20-year chart with the S&P 500 index plotted as a monthly bar chart.

Chart 20yr: 1977 Bear Market

The 1977 bear market on a 20-year chart for the S&P 500 index 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 1977 bear market lower.

The 1977 bear market was part of the mid 1960s to 1970s market congestion where the S&P 500 index oscillated up and down with wild market swings. Rising inflation and economic uncertainty were factors driving these market swings.

The 1977 bear market interrupted the preceding 1975-1976 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.

3-year Market Chart

The 1977 bear market is shown again with a shorter time-frame on a 3-year chart plotted as a weekly bar chart.

Chart 5yr: 1977 Bear Market

The 1977 bear market on a 3-year chart for the S&P 500 index plotted as a weekly bar chart.

The shorter time-frame provides more detail. As the chart shows, the 1977 bear market was a minor bear market losing only 20% over a 13-month period. The bear market started in January 1977 and ended in February 1978.

Market Chart: Rallies and Pullbacks

The 1977 bear market is shown again with a 3-year line chart and two moving average indicators.

Chart MA: 1977 Bear Market

The 1977 bear market on a 3-year chart for the S&P 500 index plotted with a line chart and two moving average indicators.

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 first down leg saw the S&P 500 index gradually declined from January 1977 (noted on the chart as the 2nd RH - Relative High) until June 1977 (the 2nd RL - Relative Low).

The market then briefly rallies until August 1977 (3rd RH). From here the market sells off with the second down leg which sees the S&P 500 index bottom in February 1978 (3rd RL).

With the end of the bear market the S&P 500 index then starts rallying with the 1978-1980 bull market.