Indicator of the Week: Inside a Historic First for the SPX

The S&P 500 Index (SPX) has done something this year it's never done before

Senior Quantitative Analyst
Jul 22, 2015 at 7:10 AM
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There have been 138 trading days thus far in 2015. Looking at each year since 1950 (66 total years), after 138 trading days, this is just the 16th time that more than half of the days were down days for the S&P 500 Index (SPX). Interestingly, of those 16 years, this year is the only time the index has been positive, as it is up 2.93% in 2015. You can see in the plot below that 2015 is the only point in that upper left quadrant. As you would expect, there's a pretty strong correlation between the number of up days and the percent return for the SPX. However, does the percentage of up days at this point in the year tell us anything about what the rest of the year might do?

                  

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Percentage of Up Days & Rest-of-Year Returns: Here's a simple way to see if the percentage of up days is predictive of market strength going forward. So far this year, less than half of the trading days have been positive. As you can see in the table below, the S&P 500 tends to underperform when this is the case. The index averages about a 2% gain for the rest of the year, with just 53% of those returns positive. In other years, the S&P 500 averages a gain closer to 4.5%, with about 80% of the returns positive. 

One could argue, though, that this year is a little different due to the fact that while over half of the days are negative, the S&P 500 is up over that time frame. Unfortunately, we have no historical precedent of this happening, so we can't look back at prior instances.                                     

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Stocks Bucking the Trend: Finally, if you buy into the fact that a high percentage of up days signifies strength, then I thought it could be helpful to see the S&P 500 stocks that have had a high percentage of positive days. Below is the list of the top 20 stocks by this measure. 

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