What Tuesday's COMP Rally Could Signal in the Short Term

The COMP added 2.89% on Tuesday

Karee Venema

Mar 2, 2016 at 9:33 AM

Stocks rallied hard yesterday -- kicking off a historically bullish month on a strong note -- with the Dow, S&P 500 Index (SPX), and Nasdaq Composite (COMP) all tacking on more than 2%. The COMP, in fact, rose nearly 3%, notching its loftiest one-day percentage gain since Aug. 26. So, what does this mean for the bigger picture -- something that can also be gauged by looking at the SPDR S&P 500 ETF Trust's (SPY) February close above this critical trendline. Schaeffer's Senior Quantitative Analyst Rocky White ran the numbers, and, if history is any guide, things look pretty good for stocks in the short term.

Specifically, going back to 2009, there have been 34 other instances in which the COMP gained 2.89% or more in a single day. While the next-day returns aren't as encouraging -- the index has averaged a loss of 0.14%, compared to an anytime gain of 0.1% -- the one-month return is a more impressive 2.3%. Meanwhile, the COMP averages a slimmer one-month anytime return of 1.4%.

Additionally, if past is precedent, the stock market could see increased volatility in the near term. In the previous times the COMP has had such hefty advances, the one-month standard deviation is 7.3%, compared to an anytime standard deviation of 4.9%.

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