The 50% Retracement Level
A Look at Nine Stock Market Indices
by Ron Griess
Proprietor, The Chart Store
www.thechartstore.com
July 27, 2004

Comments: One of the rules of stock markets in the past was to expect reactions in and around the 50% retracement level of bear market declines. In this Observation, we look at nine stock market indices to see what has happened this time.

The following charts illustrate the �bear market� decline for nine indices and the ensuing rally from the lows. Each chart has a summary table of the high, low, point decline, % decline and a calculated price to represent the 50% retracement level. The red line on the left represents the decline, the green line on the right represents the calculated 50% retracement level. Weekly charts are shown through July 23 and monthly charts through June.

Summary Points:

• The dates of the bull market highs vary from as early as April, 1998 for the Value Line Geometric to as late as April, 2002 for the S&P MidCap.
• All but one index, the Dow Jones Transportation Average (DJTA), bottomed in October 2002. The DJTA bottomed in March 2003.
• The worst performing index from top to bottom was the NASDAQ 100, down 83.5%.
• One index, the S&P MidCap has taken out its old high. Another index, the Russell 2000 rallied to with a point or so of its old high.
• All but the NASDAQ 100 and NASDAQ Composite have exceeded the 50% retracement level. Two of the broadest indices, the S&P Composite and Russell 1000, have only slightly exceeded their 50% retracement levels.

© 2004 Ron Griess
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