Below are a series of charts covering various bear markets over the past 100 years. While some of them might seem minor on a chart, they all on a percentage basis caused pain and fear in the stock market as well as the economy. The indicators on these charts are a 55 period moving average and an 89 period linear regression(green line) with lines showing 2(blue) and 3(read) standard deviations from this regression.
The chart below covers the period from 1917 through 1945. The roaring 20's are clearly visible and so is the painful fall that started in 1929 and didn't end until 1932. A second bear market occurred again in 1937. This one was less drastic, but a recovery was slow in coming.
Dow Jones Industrial Average 1917-1945 Monthly Chart (click to enlarge)
The next chart below shows the period from 1929 through 1954. The 1946 post world war II bear market is visible. It is not as extreme as the earlier two,but it still took 4 years for it to recover. Once this recovering was finished, a new bull moved started, and things were good again.
Dow Jones Industrial Average 1929-1954 Monthly Chart (click to enlarge)
The chart below covers the time frame from 1943 through 1970. The bear markets are marked in red circles. The 1957 bear market that was basically lead by a commodity bear market. This was followed by bear markets in 1962 and 1969.
Dow Jones Industrial Average 1943-1970 Monthly Chart(click to enlarge)
The following chart shows the market between 1959 through 1986. The 1969 bear market is shown, along with the 1973 bear market spurred by the energy crisis. Once the market broke out of the range it was in for the 1970's, a strong bull market took prices on a great move. In 1986 things looked extended when prices reached the 1729 area, as prices seemed to stall outside the 3 standard deviation area.
Dow Jones Industrial Average 1959-1986 Monthly Chart(click to enlarge)
This next chart shows that prices paused around the 1729 area, only to make another extended run to above 2500. Careers were made in calling this overbought condition. Some of the people who called this top are still seen on tv today every time the market is in a strong down move.
Dow Jones Industrial Average 1970-1987 Monthly Chart(click to enlarge)
The down move from above this 2500 area in 1987 was very quick compared to other bear moves. The move downward move stalled right at the 1 standard deviation below the linear regression.
Dow Jones Industrial Average 1987 Monthly Chart(click to enlarge)
This next chart shows the long sometime slow, sometimes fast, move from 1987 until the year 2000. While this was basically an orderly move without, it was also an unprecedented long period of time without a corrective move down. This as we know came to and end.
Dow Jones Industrial Average 1987-2000 Monthly Chart(click to enlarge)
This chart shows the corrective move back to the linear regression and then to area below 3 standard deviations. This is a big move down, and as some remember it sure felt that way.
Dow Jones Industrial Average 2000-2003 Monthly Chart(click to enlarge)
The last and final chart shows things where we are today. Prices are below 3 standard deviations. Does that mean it is a time to buy? It doesn't mean that. It means that prices have reached an extreme, and that the trend is setting up to change. Any rally will be met with resistance as prices go higher, until we establish a higher low and general feeling of uncertainty and fear subside. There are times to be a hero, this is not one of them...yet.
Dow Jones Industrial Average 2008 Monthly Chart(click to enlarge)