Weakness Begets Weakness Pt 2
By
Rennie on Sunday, July 4th, 2010 at 6:29 pm
As a brief follow-up to my earlier post, I’d also note that we’re seeing a similar pattern of weakness on the monthly S&P500 chart. The SPX just completed its second consecutive month with more than a 5% decline, a pattern that’s only occurred 21 times in the last eighty years. Each of those instances is listed in the table below, along with the maximum drawdown sustained over the following month…
S&P500 -5% Two Consecutive Months
06/30/10… S&P down as much as ??? next month
02/27/09… S&P down as much as 9.3% next month
10/31/08… S&P down as much as 23.5% next month
07/31/02… S&P down as much as 8.6% next month
09/28/01… S&P down as much as 1.4% next month
03/30/01… S&P down as much as 5.9% next month
09/28/90… S&P down as much as 3.8% next month
11/30/87… S&P down as much as 3.9% next month
09/30/81… S&P down as much as 1.0% next month
08/30/74… S&P down as much as 13.3% next month
05/29/70… S&P down as much as 5.6% next month
07/31/69… S&P down as much as 0.4% next month
05/31/62… S&P down as much as 13.9% next month
09/30/46… Dow down as much as 6.9% next month
10/30/37… Dow down as much as 18.6% next month
10/31/33… Dow down as much as 1.5% next month
11/30/32… Dow down as much as 2.3% next month
04/30/32… Dow down as much as 21.1% next month
12/31/31… Dow down as much as 10.3% next month
04/30/31… Dow down as much as 15.8% next month
10/31/30… Dow down as much as 8.2% next month
10/31/29… Dow down as much as 28.6% next month
Prior to 1962 our S&P database is close-only, so I shifted the study over to Dow Industrials data at that point to accurately measure the maximum drawdown. Note that out of 21 occurrences, the market traded down at least 5% the next month 14 times, or 67% of the time. That’s a very high percentage when you consider the random chance for a 5%+ intramonth drop one month later is ony 23%. Similar to the weekly study posted earlier, a pair of unusually large down bars on the monthly S&P chart often means selling pressure will carry over into the following month.
Weakness Begets Weakness Pt 2
By Rennie on Sunday, July 4th, 2010 at 6:29 pmAs a brief follow-up to my earlier post, I’d also note that we’re seeing a similar pattern of weakness on the monthly S&P500 chart. The SPX just completed its second consecutive month with more than a 5% decline, a pattern that’s only occurred 21 times in the last eighty years. Each of those instances is listed in the table below, along with the maximum drawdown sustained over the following month…
S&P500 -5% Two Consecutive Months
06/30/10… S&P down as much as ??? next month
02/27/09… S&P down as much as 9.3% next month
10/31/08… S&P down as much as 23.5% next month
07/31/02… S&P down as much as 8.6% next month
09/28/01… S&P down as much as 1.4% next month
03/30/01… S&P down as much as 5.9% next month
09/28/90… S&P down as much as 3.8% next month
11/30/87… S&P down as much as 3.9% next month
09/30/81… S&P down as much as 1.0% next month
08/30/74… S&P down as much as 13.3% next month
05/29/70… S&P down as much as 5.6% next month
07/31/69… S&P down as much as 0.4% next month
05/31/62… S&P down as much as 13.9% next month
09/30/46… Dow down as much as 6.9% next month
10/30/37… Dow down as much as 18.6% next month
10/31/33… Dow down as much as 1.5% next month
11/30/32… Dow down as much as 2.3% next month
04/30/32… Dow down as much as 21.1% next month
12/31/31… Dow down as much as 10.3% next month
04/30/31… Dow down as much as 15.8% next month
10/31/30… Dow down as much as 8.2% next month
10/31/29… Dow down as much as 28.6% next month
Prior to 1962 our S&P database is close-only, so I shifted the study over to Dow Industrials data at that point to accurately measure the maximum drawdown. Note that out of 21 occurrences, the market traded down at least 5% the next month 14 times, or 67% of the time. That’s a very high percentage when you consider the random chance for a 5%+ intramonth drop one month later is ony 23%. Similar to the weekly study posted earlier, a pair of unusually large down bars on the monthly S&P chart often means selling pressure will carry over into the following month.