Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Historical Precedent Need Not Apply


To understand where we're going, we need to appreciate where we've been


Editor's Note: This content was published in real-time on the Buzz & Banter (click for a free trial). It's being reposted here for the benefit of the

Gotta love Minyans, always watching each others' backs!

I shared a Buzz earlier as "food for thought" regarding the S&P 200-day moving average.

Lest you're lazy like I am, this was the vibe:

At the high of October 2007, the S&P was 15.5% above the 200-day moving average. Between 2003 and 2007, the maximum dispersion was 12.4%. Today, the S&P is 16.7% above the 200-day moving average.

Minyan Chad shot me a chart showing periods when the S&P traded 40% below the 200-day moving average. The only reading was in 1932 (-50%) and the post-crash rebound was 57% above the 200-day moving average. At the nadir of the recent (current?) crisis, the S&P was 40% below the 200-day moving average, as a point of comparison.

As further grist for the mill, the savvy seers at Bespoke Investment Group have a note out this morning that touches on a similar topic. They peaked at periods when the S&P traversed from 20% below the 200-day to 20% above.

Since 1928, it's happened three times--1932, 1938 and 1975--and each time, the S&P was lower one, three and six months later every time but--and this is a big 'ol but--the average return, one year later, was 13.3%, with positive returns two out of three times.

"If the S&P follows the historical script," they opined, "the typical fourth quarter rally could face some stiff headwinds."

I often say that we're in unique times--that FDR didn't know what a derivative was nor was more than 60% of Americans invested during The Great Depression--so historical precedent need not apply.

Given the debate on the current state, however, mis ojos son tus ojos as we fit the pieces together.


< Previous
  • 1
Next >
Position in S&P

Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at

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.

Featured Videos