Many years ago I came across a paper on stock market reaction to tragic events. The conclusion of the paper was " in a major market cycle irrespective of bear or bull, any tragic event or disaster has no significant effect on the long-term/major market trend". The impact of tragic events to the stock market is short-term in nature. From the following charts that marked some of the tragic events, we can examine each individual impact to the stock market.
The bombing of Pear Harbour on 7 December 1941 as indicated on the above chart, the event was at the end of the 1937 to 1942 bear cycle. If the asterisk is removed from the chart, one can hardly pinpoint the location of the event. The event provided a reason for a climax sell-off to mark the end of a 5 years bear cycle.
The assassination of Martin Luther King on 4 April 1968 did not reflect as a bearish event on the chart. There were several sharp pullback to the bull run before and after this event that has no historical impact.
The Cuban Missile Crisis in September and October 1962 was unable to stop the new bull from running and the 22 November J.F. Kennedy assassination did not reverse the course of the bull run. Similarly if the two asterisks and the years indicator were removed from the chart, nobody is able to locate the events from the chart.
September 11 bombing of the World Trade Centers in 2001 took place during the Dot-Com bear market. The Dow had been falling before the event (Osama dumping US stock in advance ???), the sharp sell down had given traders a chance to make money. Sars in early 2003 had given a reason to the market to have its wave 2 pull back before the wave 3 run-up. Similarly the current swine flu, I believed, is providing a reason to the current market to consolidate in preparation for the next surge.
The bombing of Pear Harbour on 7 December 1941 as indicated on the above chart, the event was at the end of the 1937 to 1942 bear cycle. If the asterisk is removed from the chart, one can hardly pinpoint the location of the event. The event provided a reason for a climax sell-off to mark the end of a 5 years bear cycle.
The assassination of Martin Luther King on 4 April 1968 did not reflect as a bearish event on the chart. There were several sharp pullback to the bull run before and after this event that has no historical impact.
The Cuban Missile Crisis in September and October 1962 was unable to stop the new bull from running and the 22 November J.F. Kennedy assassination did not reverse the course of the bull run. Similarly if the two asterisks and the years indicator were removed from the chart, nobody is able to locate the events from the chart.
September 11 bombing of the World Trade Centers in 2001 took place during the Dot-Com bear market. The Dow had been falling before the event (Osama dumping US stock in advance ???), the sharp sell down had given traders a chance to make money. Sars in early 2003 had given a reason to the market to have its wave 2 pull back before the wave 3 run-up. Similarly the current swine flu, I believed, is providing a reason to the current market to consolidate in preparation for the next surge.
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