Stocktake: Rapid recovery augurs well for stocks

History shows recovery swings are almost always followed by gains

Traders work on the floor of the New York Stock Exchange. Photograph: Spencer Platt/Getty Images

Traders work on the floor of the New York Stock Exchange. Photograph: Spencer Platt/Getty Images

 

The recent market turnaround has been swift. After swooning in September, more than 90 per cent of S&P 500 stocks fell below their 10-day moving average; within a fortnight, more than 90 per cent were above it.

Rapid recoveries make some investors nervous, but such swings are actually bullish, according to LPL Research’s Ryan Detrick. Since 2002, there have been 15 such instances; a year later, stocks were higher on all but one occasion, enjoying average and median gains of more than 18 per cent.

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