Market Analysis
2008 Bear Market
The 2008 bear market (also known as the 2008 Financial Crises) started in October 2007 and lost 55% over a 17-month period. The bear market ended in March 2009.
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 2008 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: 2008 Bear Market
Chart by stockcharts.com
As can be readily observed from the long-term 90-year market chart, the 2008 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 2008 bear market on a 20-year chart with the S&P 500 index plotted as a monthly bar chart.
Chart 20yr: 2008 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 2008 bear market lower fueled by the international banking crisis from 2008 and cutting short the 2003-2007 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 2008 bear market is shown again with a shorter time-frame on a 3-year chart plotted as a weekly bar chart.
Chart 3yr: 2008 Bear Market
Chart by stockcharts.com
The shorter time-frame provides more detail. As the chart shows, the 2008 bear market lost 55% over a 17-month period. The bear market started in October 2007 and ended in March 2009.
Market Chart: Rallies and Pullbacks
The 2008 bear market is shown again with a 3-year line chart and two moving average indicators.
Chart MA: 2008 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 2008 bear market sold down in three stages.
The first down leg saw the S&P 500 index drop from October 2007 (noted on the chart with the first RH - Relative High) until March 2008 (the first RL - Relative Low).
The market then briefly rallies until June 2008 (2nd RH) and then plunges down as the financial banking crises intensifies.
The S&P 500 index finally reaches a bottom in March 2009. With the bear market over, the S&P 500 index then starts rallying with the 2009-2020 bull market.