Long-term SPX Observations
By
Rennie on Sunday, September 25th, 2011 at 4:58 pm
The SPX is on the verge of posting its second consecutive month with more than a 5% decline, a pattern that’s only occurred 22 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 1.9% 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
Out of 22 occurrences, the market traded down at least 5% the next month 14 times, or 64% of the time. That’s a high percentage when you consider the random chance for a 5%+ intramonth drop one month later is only 23%.
The S&P500 just posted back-to-back outside weeks (meaning the high was greater than the previous week’s high and the low less than the previous week’s low). Of the dozen instances in which the S&P500 posted back-to-back outside weeks since 1970, the S&P proceeded to post a lower weekly close (below the setup week’s close) within the next two weeks 11 out of 12 times…
Back-to-Back Outside Weeks for S&P500
09/23/11… ???
04/30/10… Lower weekly close one week later
01/12/07… Lower weekly close one week later
09/15/06… Lower weekly close one week later
01/06/06… Lower weekly close two weeks later
10/01/04… Lower weekly close one week later
06/23/00… Lower weekly close five weeks later (*)
02/04/94… Lower weekly close two weeks later
08/23/91… Lower weekly close two weeks later
10/07/83… Lower weekly close one week later
07/29/83… Lower weekly close one week later
07/18/75… Lower weekly close one week later
11/02/73… Lower weekly close one week later
The 20-bar moving average on the monthly S&P chart currently stands at 1205. Assuming we hold below that level this week, the S&P will close below that average, triggering a sell on the monthly moving average strategy (see this column from June for the track record.)
Also worth noting is that unless the S&P can rally back over 1188 this coming week, the S&P will post a quarterly loss in excess of 10%. In reviewing previous 10%+ quarterly declines, it seems best to wait and see if the S&P can rally 5% during the next quarter before considering a buy. In 12 out of 14 cases, a 5% rally led to further gains heading into the end of the quarter, and the two losses were minimal. The table below lists every occurrence since 1940, beginning with the date when the S&P fell 10%+ in a quarter, and followed by the maximum gain over the next quarter and where the S&P settled that next quarter…
Following 10% Down Quarter, S&P500 Rallies 5% Next Quarter
09/30/10… SPX +12.3% intraquarter, closes Quarter +10.7%
06/30/09… SPX +19.9% intraquarter, closes Quarter +15.2%
12/31/02… SPX +17.1% intraquarter, closes Quarter +7.9%
12/31/01… SPX +12.8% intraquarter, closes Quarter +10.3%
06/29/01… SPX +13.4% intraquarter, closes Quarter +5.5%
12/31/98… SPX +22.4% intraquarter, closes Quarter +20.9%
12/31/90… SPX +9.1% intraquarter, closes Quarter +7.9%
03/31/88… SPX +10.3% intraquarter, closes Quarter +4.8%
12/31/81… SPX +9.6% intraquarter, closes Quarter +5.5%
12/31/75… SPX +10.1% intraquarter, closes Quarter +7.5%
12/31/74… SPX +21.8% intraquarter, closes Quarter +7.9%
09/30/70… SPX +16.9% intraquarter, closes Quarter +15.9%
09/28/62… SPX +10.2% intraquarter, closes Quarter +2.8% (*)
09/30/40… SPX +9.5% intraquarter, closes Quarter +6.8%
I would add that this concept did not work in the 30′s, so it’s debatable how much weight to assign this particular pattern.
Long-term SPX Observations
By Rennie on Sunday, September 25th, 2011 at 4:58 pmThe SPX is on the verge of posting its second consecutive month with more than a 5% decline, a pattern that’s only occurred 22 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 1.9% 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
Out of 22 occurrences, the market traded down at least 5% the next month 14 times, or 64% of the time. That’s a high percentage when you consider the random chance for a 5%+ intramonth drop one month later is only 23%.
The S&P500 just posted back-to-back outside weeks (meaning the high was greater than the previous week’s high and the low less than the previous week’s low). Of the dozen instances in which the S&P500 posted back-to-back outside weeks since 1970, the S&P proceeded to post a lower weekly close (below the setup week’s close) within the next two weeks 11 out of 12 times…
Back-to-Back Outside Weeks for S&P500
09/23/11… ???
04/30/10… Lower weekly close one week later
01/12/07… Lower weekly close one week later
09/15/06… Lower weekly close one week later
01/06/06… Lower weekly close two weeks later
10/01/04… Lower weekly close one week later
06/23/00… Lower weekly close five weeks later (*)
02/04/94… Lower weekly close two weeks later
08/23/91… Lower weekly close two weeks later
10/07/83… Lower weekly close one week later
07/29/83… Lower weekly close one week later
07/18/75… Lower weekly close one week later
11/02/73… Lower weekly close one week later
The 20-bar moving average on the monthly S&P chart currently stands at 1205. Assuming we hold below that level this week, the S&P will close below that average, triggering a sell on the monthly moving average strategy (see this column from June for the track record.)
Also worth noting is that unless the S&P can rally back over 1188 this coming week, the S&P will post a quarterly loss in excess of 10%. In reviewing previous 10%+ quarterly declines, it seems best to wait and see if the S&P can rally 5% during the next quarter before considering a buy. In 12 out of 14 cases, a 5% rally led to further gains heading into the end of the quarter, and the two losses were minimal. The table below lists every occurrence since 1940, beginning with the date when the S&P fell 10%+ in a quarter, and followed by the maximum gain over the next quarter and where the S&P settled that next quarter…
Following 10% Down Quarter, S&P500 Rallies 5% Next Quarter
09/30/10… SPX +12.3% intraquarter, closes Quarter +10.7%
06/30/09… SPX +19.9% intraquarter, closes Quarter +15.2%
12/31/02… SPX +17.1% intraquarter, closes Quarter +7.9%
12/31/01… SPX +12.8% intraquarter, closes Quarter +10.3%
06/29/01… SPX +13.4% intraquarter, closes Quarter +5.5%
12/31/98… SPX +22.4% intraquarter, closes Quarter +20.9%
12/31/90… SPX +9.1% intraquarter, closes Quarter +7.9%
03/31/88… SPX +10.3% intraquarter, closes Quarter +4.8%
12/31/81… SPX +9.6% intraquarter, closes Quarter +5.5%
12/31/75… SPX +10.1% intraquarter, closes Quarter +7.5%
12/31/74… SPX +21.8% intraquarter, closes Quarter +7.9%
09/30/70… SPX +16.9% intraquarter, closes Quarter +15.9%
09/28/62… SPX +10.2% intraquarter, closes Quarter +2.8% (*)
09/30/40… SPX +9.5% intraquarter, closes Quarter +6.8%
I would add that this concept did not work in the 30′s, so it’s debatable how much weight to assign this particular pattern.