Global markets are in midst of a severe sell off. We are in a terrible bear market, and the question we need to ask – Is this the repeat of bear market of 2000-2002?
The answer is may be YES.
There is amazing similarity you can spot on charts between what is happening now and what happened in 2000-2002. The image above is the Nifty weekly chart of 2000-2002 period –
As you can see in the chart above, the 2000-2002 bear market was not only painful in terms of price correction but also time correction. Here are some facts –
o Nifty peaked in Feb 2000
o It then took 8 months for the market to slide to 200 week moving average. The price correction was 36% and it happened between Feb 2000 and October 2000.
o The market then bounced back from 200 week moving average – 20% bounce. This was Oct-Feb period – generally good period of equities
o The market then tumbled below 200 week moving average in March 2001.
o The market sharply tumbled 30% on break below 200 week moving average.
o Time Correction – It took 29 months for market to recover once market slipped below 200 week ma. It was a painful slow recovery.
o Every rally below 200 week ma got arrested at 200 week ma during those 29 months of recovery.
o The bull market resumed when market finally broke out above 200 week ma in August 2003.
Ironically now, a similar story is getting played out in 2008. FYI – 200 week moving average = 3648. This level also coincides with 50% retracement of bull run from 920 to 6300.