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As any market analyst will probably tell you, the problem with using historical data to extrapolate what's likely to occur in the stock market is that, well, the market is snubbing its collective nose at history.

BCA Research sounded a little upbeat in a brief note to clients. They noted that the rate of change in the S&P 500 over the past eight weeks has plunged 18 per cent - a shift that occurred just eight times since 1965. If history is any guide, they say, the stock market tends to perform well after these setbacks. Within one month, stocks have risen an average of 6.8 per cent; within three months, they have risen an average of 7 per cent; and within six months, they have risen an average of 15 per cent.

The question is, Is history a guide? One measure of volatility - the number of 3 percentage point moves in the S&P 500 during any given day - is at a level not seen since the 1930s. Yes, that's still history, but so far back in time that the market today looks as though it is exploring uncharted territory.

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"The painful liquidation phase should soon run its course," BCA Research said. But here's the caveat: "A sustainable recovery will require a turn in the credit cycle, which may require co-ordinated rate cuts and/or other bold policy moves."

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