Breach of 12-year lows has some analysts wondering if it's 1932 or 1974

[Italkcash Newsfeed]

As U.S. stocks on Tuesday tried and then failed to bounce back from the prior day's stumble to 12-year lows, analysts, technicians and would-be historians debated the significance of the fall, which may or may not signal an important market milestone.

On Tuesday, financials were pacing a slide that came as Federal Reserve Chairman Ben Bernanke answered questions about the economy and the government's efforts to bolster the financial system. After rising 70-plus points early on, the Dow Jones Industrial Average was off 32.97 points at midday, at 6,730.32. The S&P 500 declined 5.63 points to 695.19, and the Nasdaq Composite shed 4.85 points to 1,318.

On Monday, the Dow closed at 6,763, a level not seen since 1997. If nothing else, the breach of 12-year lows is unusual. Other than Monday's retesting of 1997 lows, such a crossing has occurred only twice before, on Dec. 6, 1974, and April 8, 1932.

"What we found intriguing is that the 12-year lows were breached at a critical juncture in the bear markets," JPMorgan Chase & Co. equity analysts Thomas Lee, Bhupinder Singh and Daniel McElligott wrote in a late Monday research note. The breaches were very close to the final lows, they said.
In 1932, the April 8 finish came three months before the market hit its bottom, while 42 years later, the Dec. 6 breach marked the exact end of the 1974 low.

"We do not want to intimate that just because we are visiting levels seen 12 years ago, the bear market needs to suddenly reverse. But since 12-year lows have happened only twice in the history of the index and at important junctures in bear markets, we have to take notice," the JPMorgan Chase analysts said.

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