Market Snapshot
Jun 5, 2009, 2:30 p.m. EST
New bull run called by tracker of Dow's historical
trendsQuarterly climbs of 20% or more have come just 18 times in more than a
century
By Kate Gibson, MarketWatch
NEW YORK (MarketWatch) -- The 13-week surge that followed the Dow Jones
Industrial Average's early March lows is second only to the
post-Depression bull run, with odds favoring a further rise during the
next three months, one strategist said.
"I say this with the utmost confidence and my fingers tightly crossed:
This is the start of a new bull run," said Hugh Johnson, chairman of
Johnson Illington Advisors.
The 13-week stretch from March 9 through last Friday, in which the Dow
industrials soared 28.3%, ranks second only to the Dow's 94% run-up in
the two months following its early July 1932 bottoming.
MarketWatch Hot Stocks: Merck, J&J In
Focus
Merck shares were weaker after the company said it would not seek
approval for a heart drug and Johnson & Johnson shares eased as the
company closed in on an acquisition. (June 5)
Going back to 1900, Johnson counts 18 surges of
20% or more in any given quarter.
Looking at the trends, odds are even that the Dow industrials will be
higher in three weeks, yet those chances strengthen in the index's
favor three months from now.
"Based on history, who knows where we're going to be four weeks from
now? But in 12 weeks, the odds are we'll be 3.8% higher," said Johnson.
Roll of the dice
But Johnson offers no guarantees, saying the history books also offer at least
one example of a more gruesome outcome.
'You can get beat up bad.'
Hugh Johnson, Johnson Illington Advisors
"There was a time when we not only didn't go higher, but we got killed.
In May 1929 we had a big surge up of 26% over 13 weeks, and in the next
12 weeks after that surge, the market fell 38.9%. You can get beat up
bad," he said.
On Wall Street, U.S. stocks pulled higher Friday after wavering in both
directions as traders questioned a surprising unemployment report. The
government reported that 345,000 jobs were cut, less than the expected
500,000, while the rate of unemployment climbed from 8.9% in April to
9.4% last month. Read Economic Report.
"There is also some logical profit-taking," Art Hogan, chief market
strategist at Jefferies & Co., said of Wall Street's about-face.
Both the Dow Jones Industrial Average and the S&P 500 Index on
Friday were headed to a third consecutive week of gains, with
industrials and consumer-discretionary shares leading gains.
Turning positive for the first time this year, the Dow industrials
added 44.31 points, or 0.5%, to 8,794.5. The S&P 500 rose
fractionally to 943.03, while the technology-laden Nasdaq Composite was
also ahead less than one point to stand at 1,850.8.
The message of the market is "the economy and earnings are going to recover,
and investors are usually right," said Johnson.
"Markets are up almost 40% since early March, and I simply don't
believe we're out of trouble," said Michael Farr, president of Farr,
Miller & Washington LLC.
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