Everyone with some financial sense knows that the markets (S&P 500 specifically) have been continually hitting new highs or at least new multi-year highs respectively. The strange thing is that we have not seen many corrections in that period. In fact, the S&P 500 is on quite an impressive streak right now (see below). Typically, when the market makes a move higher, it tends to make several corrections on its way up, but that has not been the case this past year.
It’s Friday and I thought it would be fun to present some statistics, so I decided to do a little research on how long it has been since we have had a two day correction of more than 2.5%. In order to do that, I took market data (S&P) since the beginning of 1999 and looked at the daily percentage losses and the consecutive two day percentage losses. It revealed some interesting things.
As of today, February 2, 2007, it has been 934 days since the S&P 500 had a single day correction of more than 2.5%. That was more than 3 years ago on May 19th 2003 when the market was at 942.46 (25% lower than today) and fell 23.53 points or 2.49% in a single day. Today, a 23 point drop would take us lower by 1.8%.
The last consecutive two day loss of more than 2.5% was 453 days ago on April 14th and 15th of 2005 when the market fell 11.74 and 19.44 points respectively for a total of 31.18 points or 2.67%.
Now let’s put this in perspective. Take a look at the table below for a few numbers. The average days until another two day loss of 2.5% or more was much lower
when the market had week performance in 2001-2002. This was turned around in 2003 when the market began climbing, but even during those gains (which were similar to the gains in 2006) the market still had several two day corrections of 2.5% or more.
As you can see, the streak we have going right now is an impressive streak. 453 days without a two day correction of 2.5% or more is pretty extraordinary and I would put it up there as impressive as other current streaks (although sports related); Tiger Wood’s seven consecutive PGA Tour wins and Roger Federer’s 36 consecutive matches won.
Without further research, this means that the market would have to go back more than 10-20 years to find as impressive of a streak in the market. With that said, only time will tell when the market will finally break this streak as it is bound to happen at some point in the future. In the meantime, enjoy it while it lasts.
Parrot Trading Partners, LLC