When the Dow Jones Industrial Average rallied above 10,000 in mid-October, it understandably got a lot of attention from Wall Street and Main Street. It also generated lots of excitement that the bull market is back. But please allow me to put some perspective on this rally.
From October 2007 to March 2009, the S&P lost 58%, high to low. Towards the end of the collapse, you'd be hard-pressed to find anyone who was optimistic about the stock market. (I know, because I got several panicked calls from friends around that time -- some I've not heard from in months -- all ready to sell their stocks.)
In the midst of that gloom, EWI's president Robert Prechter published his regular monthly Elliott Wave Theorist (February 23) with a bullish forecast. Bob said that after the S&P "ideally continued down into the 600s” before bottoming (a forecast the S&P fulfilled perfectly), a "sharp" rally should start.
After stocks had bottomed, EWI's Short Term Update wrote on March 23 "that a longer-term push back toward 10,000 [in the DJIA] is now unfolding."
I'm not quoting this just to demonstrate how valuable Elliott wave insights can be. There's a more important reason, as summarized in Bob Prechter's October Elliott Wave Theorist:
"Figure 8 shows that the S&P rose 56% [from 667 in March to over 1000 in late August] and since then it has gained only 5.5%, one-tenth as much."
Bob Prechter wrote this on October 18, with the S&P at 1,087. Today (Nov. 20), the S&P closed at 1,091, so Bob's numbers still stand: a 5.5% rally since late August vs. a 56% rally in the preceding five months.
My point? The time to get really excited about this rally was probably back in March. Investors who waited until the economy improved enough to give them confidence to buy stocks again did so just as the rally slowed to a virtual halt.