Ninety years ago, seems like yesterday. We try to mark the Great Depression bottom in the Dow Jones Industrial Average but sometimes forget.
Here's the 2014 version:
Today is The Anniversary of the All-time Low in the Dow Jones Industrials (and while we're at it: the Greatest Market Call Ever)
And Dow Theorist Robert Rhea called the end of the Big Bear a couple weeks later. As I relayed back in June, 2008:
Worst June Since 1930
After that July 8,1932 closing low of 41.22, the Dow put on a nifty little seven week sprint to an intraday high of 77.01 on August 29. That 87% move might be the largest ever for a major index.
Of course very few people called the bottom with the notable exception of Robert Rhea:
...The next great Dow theorist, Robert Rhea, initially stumbled upon the Dow Theory during his endeavor to find "a system" for helping him make money in the stock market. In his attempts to disprove the theory, he became a convert. Rhea was a very serious student, and he was able to utilize the Dow Theory as interpreted by Hamilton to his advantage, buying and holding stocks in 1921, and basically holding them until late 1928 (he reversed his short position when he realized Hamilton's advice was incorrect in early 1926), missing only the final blowoff phase. He also "played" the short side successfully during the subsequent deflation. In 1932, he began publishing his newsletter based on the Dow Theory, called the "Dow Theory Comment."
Rhea called the bottom of the stock market in July 1932 almost to the exact day and the subsequent top in 1937. On July 21, 1932, with the Industrials at 46.50 and the Rails at 16.76, Rhea instructed his broker to tell his friends "the Dow Theory implied heavy buying for the first time in over three years." Further, on July 25, 1932, Rhea sent a memo to 50 correspondents, part of which is reproduced below:...
Source[link rotted, here's Internet Archive]
The declines of both Rail and Industrial averages between early March and midsummer were without precedent. The thirty-five year record of the averages shows a fairly uniform recovery after every major primary action, and such recoveries average around 50% of the ground lost on the decline; are seldom less than a third and more than two thirds. Such recovery periods tend to run to about 40 days, but are sometimes only three weeks - and occasionally three months.
The time element is in favor of a normal reaction at this time - because the slideoff was normal (the normal time interval of major declines being about 100 days).
The market gave the unusual picture of hovering near the lows for more than seven weeks, and might be said to have made a "line" during the latter weeks of that period.
Because of all these things, and because the volume tended to diminish on recessions and increase on rallies during the ten days preceding July 21, almost any one trading on the Dow Theory would have bought stocks on July 19th. Those who did not, had a clean cut signal again on the 21st. Since that date the implications of the averages have been uniformly bullish, and it is reasonable to expect that a normal secondary will be completed, even though the primary trend may not have changed to "bull". So much for the speculative viewpoint.
That's a long intro to a short (9 page PDF) paper:
Alfred Cowles and Robert Rhea on the Predictability of Stock Prices
...Cowles (1944) acknowledged that one series of forecasts made by three forecasters in succession from 1903 onward had a record of prediction so consistently successful that it could not be attributed to chance. Cowles (1944) did not identify who made that series of forecasts, and it is not certain who Cowles meant. The 1903 start date and the number of successive forecasters match the Dow Theory forecasts of William Peter Hamilton (believed by Cowles to have succeeded as editor of the Wall Street Journal immediately after Charles Dow died in December 1902), then Robert Rhea after Hamilton died in December 1929, and then Perry Greiner of Rhea, Greiner & Company after Rhea’s death. However, Cowles referred to “the forecasting agency with the best results for the 15 ½ years since 1927,” which would put the splicing point for the Hamilton, Rhea, and Greiner series of predictions in the period when Hamilton was writing editorials, not at the point when Hamilton died and Rhea began forecasting.MUCH MORE
Additionally it's the
