Can the S&P 500 Index (SPX) Snap Its Longest Losing Streak Since 2012?

The SPDR S&P 500 ETF (SPY) is just off its biggest swing since the financial crisis

Aug 26, 2015 at 11:38 AM
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The past week has been, well, crazy, for lack of a more intellectual term. The major market indexes have swung wildly in intraday action -- echoing a recently sounded volatility alarm -- and are on pace for their worst month in years. Against this backdrop -- and with another major pop higher this morning -- we're adding more interesting stats to the running list.

It looked like things were about to take a turn for the better yesterday morning, but the roller coaster ride continued, with stocks succumbing to a major afternoon sell-off. In fact, the SPDR S&P 500 ETF Trust (SPY) gapped higher by more than 3%, only to close 1.2% lower. 

The only other one-day turnaround that large (going back to the SPY's inception in 1993) was on Oct. 14, 2008 -- in the midst of the financial crisis -- per Schaeffer's Senior Quantitative Analyst Rocky White. Following that intraday about-face, the SPY surrendered another 9.9% the next day, and wound up dropping 14.1% over the subsequent month. This morning, the SPY jumped 2.6% higher out of the gate, and was last seen in the $189.80 ballpark.

150826SPY

Meanwhile, yesterday's eleventh-hour plunge extended the S&P 500 Index (SPX) losing streak to six sessions -- its longest since July 2012. Following that run lower, which concluded with a much milder loss of 2.9%, the SPX rebounded 1.7% the next day, and was up 3.1% the next week. Going out three months, the broad-market barometer was 7.3% higher.

The last time the S&P lost seven straight was in November 2011, culminating in a 7.6% drop. The index rebounded with a vengeance over the subsequent three months, adding 17.7%. Since 1990, the longest streak has been eight days, which last happened during the financial crisis in 2008. That drop translated into a loss of 15.6% for the SPX -- the last time the index gave up this much, this fast.

150826SPX2

Breaking down the six-day losing streaks since 1990 -- there have been 19 -- the SPX has been positive the next day 73.7% of the time, averaging a return of 0.3%. Going out three months, the index has been positive 63.2% after a six-day losing streak, averaging a gain of 3.2%. For comparison, the SPX's anytime three-month return is a milder 2.1%, with the index positive 68.2% of the time.

150826SPX3

The SPX is up 1.9% this morning. Is this the day we bounce? As we learned yesterday, anything can happen in this volatile environment.
 

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