Charts: If History Is Our Guide, the S&P Will Hit Highs Again in Two Months
Consider this period an intermediate-term buying opportunity.
When we see such all-is-well conditions, it tends to lead to not-so-well market performance. As the saying goes, "Risk happens fast."
It has certainly happened fast this time around as well. In the span of less than two weeks, the S&P 500 (INDEXSP:.INX) went from sitting within spitting distance of a 52-week high, to erasing the past 73 days' worth of gains. That's a quick adjustment in market perception.
But it's not all bad. The charts below show every time since 1928 that we saw a similar occurrence. Each of these dates highlight a period when the S&P went from closing at or very near a 52-week high, to closing at a 70-day (or more) low within two weeks.
We can see from the charts that this proved to be an intermediate-term buying opportunity every time. Three months later, the S&P was higher all eight times, averaging excellent gains of more than +8% on average. It took the S&P about two months to recover and close at a new high, with a further loss of an average -1.6% before doing so.
Clearly there was some shorter-term volatility a few times, but this is an intriguing look at how quick price shocks to a momentum market rarely lead to sustained selling pressure, at least over the next few months.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter