New chart shows market rebound off December low is reminiscent of the 1998 tech boom

The market rally is mimicking a trend that hasn't been seen in more than two decades, according to Avalon Advisors' Bill Stone.

He highlighted the pattern on CNBC's "Trading Nation" in a chart that compares 2018-2019 sharp gains with the average rebound during post-World War II non-recessionary periods.

Stone's takeaway: It looks a lot like the dot-com boom based on 65 trading days since the December low.

"This rally is second only to that 1998 rally in terms of the strength of it," the firm's chief investment officer said Wednesday.

In a note out Monday, Stone wrote "Our analysis of rebounds following large declines since World War II puts this rebound at the high end of the typical at this point."

According to Stone, stocks typically rebound 13 percent when a drop isn't connected to a recession.

Since the December meltdown, the S&P 500 has surged more than 22 percent. The index is now just 2 percent off its all-time high of 2,940, hit last September — a level he expects will be surpassed this year.

Stone, whose firm has $8.5 billion in assets under management, doesn't believe the rally's power is a harbinger of an eventual dot-com bubble-like demise. He contends the underpinnings of the economy are secure, the Federal Reserve is dovish and a China trade deal will ultimately help multinational companies regain earnings momentum.

"Even if it goes back and reverts to a normal rally with no recession, you still have some decent upside left for the rest of the year," Stone said.


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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's Closing Bell (M-F, 3PM-5PM ET). In addition, he contributes to CNBC and CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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