Importance of Consecutive 90% Down Days ????

davfor

This June 16 quote caught my eye....

As noted by BofA: “More than 90% of stocks in the S&P 500 declined today. It’s the 5th time in the past 7 days. Since 1928, there have been exactly 0 precedents. This is the most overwhelming display of selling in history.”

It's my general understanding consecutive 90% down days are often soon followed by sustained market rebounds. But, I don't have data to back this up. Any and all comments about the possible significance of this event would be appreciated.

Quote is from:

Fed Bluffs And Wall Street Calls

orage

The S&P500 index was started in 1957. Not claiming it's the case today, but the larger the share of those companies' stocks held by S&P500 index funds, the more likely those stocks would decline together.

https://www.investopedia.com/ask/answers/041015/what-history-sp-500.asp

Junkster

In 2008/09 this indicator only led to more declines. Another market tidbit courtesy of Charlie Bilello. This year to date ranks as the third worse start for the S@P since 1928. In the previous seven worst starts the S@P always closed the year higher than it’s June 17 close.

Baseball_Fan

Guys. Please. Really appreciate and respect the input but isn't this saying something similar that if a NFC team wins the Superbowl the market will go up...human brain just looking for patterns.

What happened in the past is nothing like how many trillions we're pumped into the market via fiscal monetary stimmy. I don't see how anyone can read into any of this. No one knows what the fed is going to do, if inflation keeps going up, we've never experienced a market situation like this.

I personally do think the market is due for a large bounce and then more bigly flushing but of course I'm just guessing like everyone else


Good luck and good health to all

Baseball fan

sma3

I am glad others have found Lance Roberts. I find his daily emails very interesting and useful.

A number of people are predicting a short term bear market rally, to sucker everyone back in and then a huge crash.

The thing that stands out to me is how, even after the large declines, the market is still trading a very high valuations, regardless of what measure you use.

That is unprecedented and why history is not much help

davfor

Over the past month, losses among sectors have been fairly uniform. Overweight investments in the energy and utilities sectors mitigated my overall YTD stock market losses until then with the past week hurting my portfolio the most. It appears to me the stock market decline has recently entered a new, more generalized selling phase as it moves towards it's eventual bottom. So, I suspect the 90% down days information at the start of this thread represents more than random event -- particularly if it truly spans almost 100 years of data. Every cycle is different and the recent Fed activism adds a new wrinkle. But, even so, I wonder if history could provide useful information to those who are able to read it.

sma3

I find Calum Thomas's Chartstorm useful for overall market trends. Basic version is free.

This week he makes the important point ( as have others) that despite the rapid decline in SP500 etc, and the historically fast drop in the P/E to 15 or so ( a level closer to bottom in other bear markets ave 12) the earnings estimates this is based on are still very high historically.


https://chartstorm.substack.com/p/weekly-s-and-p500-chartstorm-19-june?r=3fg9z&s=r&utm_campaign=post&utm_medium=email

yogibearbull

While the fwd P/E for small-cap (SC) R2000 has dropped dramatically, R2000 has many unprofitable companies (30-40% ?). Looking at more selective SP MC 400 and SP SC 600, those fwd P/Es have also dropped dramatically. See these charts by Yardeni via a Twitter post,
https://twitter.com/ayeshatariq/status/1538469641722413062

Observant1

“More than 90% of stocks in the S&P 500 declined today.
It’s the 5th time in the past 7 days.
Since 1928, there have been exactly 0 precedents.
This is the most overwhelming display of selling in history.”

I don't know the significance of this particular event.
Looking at the broader picture, it appears that market volatility will be high in the coming months.
An extended period of low inflation and "easy" money is behind us.
The Federal Reserve is aggressively raising the Fed funds rate and has implemented quantitative tightening. There are several current, influential events - Ukraine war, COVID-19, supply chain issues - where the final outcome is unknown.

Observant1

yogibearbull said:

While the fwd P/E for small-cap (SC) R2000 has dropped dramatically, R2000 has many unprofitable companies (30-40% ?). Looking at more selective SP MC 400 and SP SC 600, those fwd P/Es have also dropped dramatically. See these charts by Yardeni via a Twitter post,
https://twitter.com/ayeshatariq/status/1538469641722413062

The Russell 2000 is a flawed benchmark.
As was mentioned, it includes many unprofitable companies since it doesn't screen for profitability.
Also, the Russell 2000 index reconstitution process enables front-running.
The S&P 600 is a better small-cap index.

BaluBalu

Relative to S&P 500, does not the current multiple on S&P400 seem beaten up? May be S&P400 is a better pond than S&P 500 to bottom fish. The current level of MDYG, the S&P 400 Mid Cap Growth ETF, is not far from the pre-Covid high.

BaluBalu

@yogibearbull and anybody else in the know,

I started coming across Ed Yardeni commentary only recently and wanted to check with the MFO community if Ed Yardeni is considered as having a bullish or a bearish bent or is it difficult to label him that way?

BaluBalu

Is this a sign that Schwab is throwing caution (or towel, depending on your choice) to the wind?

https://www.schwab.com/resource-center/insights/content/end-rate-hikes?cmp=em-QYD

yogibearbull

Dr Ed Yardeni is generally bullish but is not a perma-bull. His data oriented website has some open access. He does built his own estimates bottoms up (like Scott Black) and I find that to be useful info.

davfor

Interesting to note the June 16 quote at the start of this thread caught the short term market bottom....

VTI Chart

LewisBraham

Heraclitus or why I find most but not all technical analysis useless: "No man can step in the same river twice." Unless an investor can explain why a previous price trend occurred and show how similar conditions outside of the price trend itself are causing it today, all you have is a previous price trend, not necessarily a causal link with the present. Explain the reason for the pattern in the past or it is reading random tea leaves without any actual meaning. Some of these price patterns can have external causes to do with investor psychology, but most I think do not. A "false cause": An informal fallacy where you argue that because event A directly preceded event B, that event A caused event B.

BenWP

Very good point, @LewisBraham. As for having stepped in other stuff while looking for wealth, that’s another analogy. Technical analysis makes no sense to me, either.

Observant1

I feel the same way about technical analysis.
But some people swear by it...

BaluBalu

Thanks, @yogibearbull. I did browse through Ed's website and thought it has info (continually updated) I can use.