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100 years of Market Cycles

Market Analysis


1918-1919 Bull Market

The 1918-1919 bull market started in December 1917 and lasted for two years with the market gaining around 80%. The bull market ended in November 1919.

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 1918-1919 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 1918-1919 bull market on a 100-year chart with the Dow Industrial Average plotted as a monthly bar chart.

Chart 100yr: 1918-1919 Bull Market

The 1918-1919 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 1918-1919 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 1918-1919 bull market on a 20-year chart with the Dow Industrial Average plotted as a monthly bar chart.

Chart 20yr: 1918-1919 Bull Market

The 1918-1919 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 1918-1919 bull market higher.

The 1918-1919 bull market continued through the end of World War I and finally peaked in November 1919 which was a full year after the end of the war. The bull market peaked at a higher level than the preceding 1915-1916 bull market and finished well above the market level in July 1914 when the war began.

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 1918-1919 bull market is shown again with a shorter time-frame on a 3-year chart plotted as a weekly bar chart.

Chart 3yr: 1918-1919 Bull Market

The 1918-1919 bull market on a 3-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 1918-1919 bull market started in December 1917 and lasted for two years. The Dow Industrial Average gained around 80% with this bull market starting a year before World War I ended in December 1918. The start of the bull market may have been influenced with America entering World War I during 1917.

Market Chart: Rallies and Pullbacks

The 1918-1919 bull market is shown again with a 3-year line chart and two moving average indicators.

Chart MA: 1918-1919 Bull Market

The 1918-1919 bull market on a 3-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 December 1917 and is noted on the chart as RL (which stands for Relative Low). This rally progressed until October 1918 and is noted as RH (Relative High).

The market then briefly pulled back until it bottomed in February 1919 (the 2nd RL on the chart). From here the market surged higher following the end of World War 1 and continued to rally to peak in November 1919 (the 2nd RH on the chart) which saw an end to the 1918-1919 bull market.

The 1920-1921 bear market then followed the 1918-1919 bull market.