The title of yesterday’s missive was “The Blow-Off Stage?”. The suggestion was given that the dominant color on my favorite models/indicator boards relating to the stock market’s trend and momentum is green, it could be possible that we are seeing what is termed a “blow-off” phase.

However, it occurred to me that not everyone reading my oftentimes meandering morning market missive might be familiar with the term. So, this morning, I thought we’d review what a “blow-off” phase looks and feels like. And then I’ll throw in a few stats, just to keep it interesting.

In general, a “blow-off” phase tends to mark the end of a cyclical bull phase. To review, the database at Ned Davis Research tells us that the cyclical bull moves in the stock market (defined as an increase in the DJIA of at least 30% after 50 calendar days – or a gain of 13% over a period of at least 155 days) since 1900 have produced an average gain of 85.5% over 768 days.

However, as logic would dictate, cyclical uptrends that occur when the stock market is in the midst of a secular bull run (note that several cyclical moves tend to occur within secular moves, which tend to last many years) tend to be longer and stronger. For example, the average gain for cyclical bull markets that occur within secular bulls since 1900 has been 106.7% over 1027 days.

To be sure, identifying a blow-off stage is best done with a healthy dose of hindsight. As such, anyone trying to suggest that such a move is occurring in real time is likely “making a call.” And to clarify, I am not suggesting that what we are seeing IS, in fact, a blow-off phase. No, I am merely trying to alert everyone to the idea that we COULD be seeing such a move here. (Or not!)

I’ve witnessed a grand total of 10 blow-offs during my career, which began in 1980. There were 3 in the 1980’s, 3 in the 1990’s, 4 in the 2000’s (well, to be fair, the blow-off that ended in January 2000 should probably be placed in the 1990’s category as it was a doozie!), and 1 so far in the decade that began in 2010.