Today, Oct. 10, marks the fifth birthday for the bull market that has blessed the markets and exchange traded funds (ETFs). The S&P 500 received official cyclical bull market status on Nov, 21, 2002, when it closed at 933.76, more than 20% above the Oct. 9 close, reports Sam Stovall for BussinessWeek.

The S&P defines a bull market as an advance of at least 20% from the low set during a prior bear market. However, that’s only one way to define a trend. Some analysts say a new trend is set if a certain behavior lasts for 20 days. According to a trading and investing newsletter from LearnMoney, anybody or anything can cause the markets to move over the short term, but moves for at least 20 days means a new trend is in place. Our position with investing is to look at trends using the 200-day moving average.

Based on the Oct. 8, 2007, close of 1,552.58, the S&P 500 is 103% higher than it was on Oct. 9, 2002. SPDRs (SPY), which is the ETF that tracks the S&P 500, is up 17.0% for the last five years. So how does our current bull market compare to other bull markets? How long can we expect this bull market to last?

By the S&P’s definition, there have been 10 completed bull markets for the S&P 500 since 1942, averaging 56 months in length. Although we just hit our 60th month in the game, three of the prior 10 bull markets have lasted longer, with the bull market of 1990-2000 being the longest. Investors who worry about investing at the height of bull markets might be happy to hear that on average, all of the prior bear market’s decline was recovered by the second year of the new bull market. Based on our current bull market’s 103% recovery of the prior bear market’s 750-point decline, this bull market’s performance places it among the slowest recoveries since 1942.

Everyone wants to know if our current bull market will celebrate a sixth birthday. S&P’s equity analysts predict that our run will be over in September of 2008 near the 1,700 level. Of course, no one really knows for sure.


The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.