300 Dow Point Gains Only Happen In Bear Markets:

You'd think by now the world would be bursting with super attractive "distress" real estate. Wrong! The "distress" is serious distress -- typically raw land and construction loans that require gigantic amounts of capital to keep afloat, that can't be borrowed against and then to wait out the sunny day. My distress real estate fund specializes in income-producing properties and it's done well by buying income producing properties secured by first mortgages. But it's hard work and the returns -- 8.7% IRR -- aren't spectacular by measures of three years ago. But they are solid returns -- unlike virtually all the hedge funds which lost money in the first half of this year.

Several people have commented that 400 point gains on the Dow only happen during bear markets. In short, don't be fooled. This chart shows them in the past several months. (click on chart to enlarge)

Paul Tudor Jones runs one of the largest and oldest hedge funds. His comments in the June 2008 of Alpha Magazine are resonating with many people in that business:

"I see the younger generation of [hedge fund managers] hampered by the need to understand and rationalize why something should go up or down. Usually, by the time that becomes self-evident, the move is already over. When I got into the business, there was so little information on fundamentals, and what little information one could get was largely imperfect. We learned to go with the chart. Why work when Mr. Market can do it for you? These days there are many more deep intellectuals in the business, and that, coupled with the explosion of information on the Internet, creates the illusion that there is an explanation for everything.....There are young men and women, graduating from college who have a tremendous work ethic, but they get lost trying to understand a whole variety of market moves....[at the end of a bull market or bear market] there's typically no logic to it; irrationality reigns supreme, and no class can teach you what to do during that brief, volatile, reign."

300 Dow Point Gains ONLY Happen in Bear Markets:

Merrill Lynch's David Rosenberg was on CNBC yesterday morning, discussing the current Bear Market. He noted that this was the sixth 300 point rally to occur since September 2007 (markets peaked the next month) -- a period of time which can only be described as a Bear Market.

(Click above chart to enlarge) Source: Merrill Lynch via The Big Picture

In the table below (from Bespoke) is shown the average performance of the S&P 500 following one-day gains of more than 2%, 3%, 4%, and 5% since 1945.  The 2% category includes all gains of 3%, 4%, and 5% etc.  In the bottom row, is also calculated the average performance of the S&P 500 following all days since 1945.  As shown in the table, the average return following big days has exceeded the average overall return in every scenario except one (the week following 5% days).  While one shouldn't go as far as to say that big days are a clear sign of a strong market going forward, based on these parameters, it's hard to make the argument that they are bear market indicators.