Second lesson of ?29 crash?bear rebound

May 21st, 2007

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Continuing from our previous articles, The Great Crash of 1929 and First lesson of ?29 crash, there is another lesson we can learn from the Great Crash.

In the immediate aftermath of a severe correction or crash, usually there will be a rebound. This is a bear market rally. Back in 1929, the bear market rally lasted for around 6 months from November 1929 before resuming a downward trend. In May last year, after the short-term gold bubble burst, there was a rebound before continuing its slide to a short-term low of around US$545. This is a recurring theme.

No doubt, after a big fall, there will be some who thinks that prices are at ?bargain? territory and thus, buy. This is the time we would sell if we happen to be caught out in a severe correction or crash.