Q2 STOCKS TO BUY

Indicator of the Week: Is Having More S&P Down Days Really a Bad Thing?

2015 has seen more down days than up days, but the SPX is still on the verge of ending positive

Senior Quantitative Analyst
Dec 30, 2015 at 7:38 AM
facebook X logo linkedin


As we go this week from 2015 into 2016, I am first going to point out an interesting stat for this year and then look at the previous years that most resembled this year. Then I'll note some simple first-quarter seasonality stats.

Down Days & Up Days: In 2015, we will end the year with more down days than up days. What if I asked you when was the last time that happened? Your first guess would probably be 2008, when the index tumbled almost 40%, but you'd be wrong. That year saw the same exact number of up days as down days (and one day that was exactly flat). The last time it happened was 13 years ago in 2002.

Still, the index is up for the year due to the fact that the average positive day was up 0.76% compared to the average loss of 0.68%, for a ratio of 1.12. That's the highest average-win-to-average-loss ratio since 1999.

I thought this was an interesting bit of information that goes to show what a tough market it has been for short-term traders. Below are some yearly stats since 2000, highlighting years that saw more down days than up days.

151229IOTW11

Years Similar to 2015: I thought this was a unique way to find similar years to 2015. Rather than looking simply at the year-to-date return, I considered the path taken throughout the year. I won't give the details of how I did that (in short, I used a "least sum of squares" method), but below are the years that most resembled 2015 in regard to the path taken by the S&P 500 Index (SPX). Eyeballing it, 2011 looks especially similar because of the sharp drawdown that occurred in August and the almost completely flat return (though by my "least sum of squares" method, 1992 is the most similar year).

151229IOTW22

The analysis above is interesting because it gives a historical reference of the type of environment we're in. 2015 was a low-volatility year, so the years that followed a similar path were also low-volatility years. I think it's interesting, then, to see how the market did going forward after these years.

The table below shows the 10 years most similar to 2015, and then how the SPX performed the following year. The good news is the first five years on the list all have positive returns the next year, with three of them showing double-digit returns. The bad news in the table below is that 2007 made the list and the following year was 2008, which I already mentioned saw the market tumble almost 40%.

151229IOTW33

Finally, in the table below I summarized the next-year returns in the table above and compared them to anytime returns on the S&P 500 over the past 50 years. Unfortunately, the analysis gives no hint on where stocks could go in 2016. In the ten instances above, the returns range from a 34% gain, to a 38% loss, to a return that rounds to exactly 0.0%. So, I guess some advice for heading into 2016 is … be prepared for anything.

151229IOTW44

 
 

Which of These SUB-$5 Stocks Could 26x From Here? (AD)

He called a rare 11x on Tesla…

Then he called a 26x on Workhorse…

Then an even rarer 35x on Nio Inc…

Now Tim Bohen says these 5 tiny “America First” stocks are next up in 2025.

They’re trading for less than $5 right now.

But thanks to Elon & Trump’s new alliance…

They could be off to the races in Trump’s first 100 days.

And right now for a limited time…

You can get the names & tickers for just $1 here. (AD)

GRAND SLAM COUNTDOWN

 
 

Featured Articles from Trusted Partners:

🚀 One Stock Pick Could Change Everything in 2025
What if one stock pick could define your success next year? Get 10 expert-vetted stocks set for 2025—plus 5 bonus picks to watch now. Get the Report →

🆕 New Options Need New Trading Strategies
Zero-DTE options are the newest (and hottest) options to trade.  Professional traders have rushed into the market and are making a mint.  Don’t get left behind - learn all about these options, how to trade them, market setups to profit from, plus much more. Download now →

👀 Revealed: 3 Defensive Stocks for Your Portfolio
Worried about the market? This free report reveals 3 under-the-radar defensive stocks for uncertain times in any kind of economy.

 

 
 

FREE Report Download

 

Follow us on X, Follow us on Twitter