Bear trap rally or new bull?


Some optimists are cheering on a new bull market, but many analysts believe we are grappling with a series of "bear-trap" rallies. We saw six weeks of gains when the S&P shot up 28.5 percent from its 12-year closing low on March 9, only to see it drop again on April 17.

These kinds of "bear-trap" rallies are nothing new after a major market shock. The S&P rallied more than 20 percent on three occasions between 1930 and 1932 while the index plunged more than 300 percent during that period. We saw a similar though less damaging phenomena between 2000 and 2002, when the S&P rallied 15 percent or more on three occasions while the index dropped 40 percent overall in that time frame.