The Significance of Tuesday's Big Dow Swing

In the 18 other times this signal has flashed since 2016, the index has finished higher more often than not the next day

Karee Venema

Aug 30, 2017 at 2:34 PM

SPX
DJIA

It was a wild day on Wall Street on Tuesday, with the Dow Jones Industrial Average (DJIA) down 0.62% -- or more than 134 points -- at its intraday low, only to finish the session higher, adding almost 57 points. This marked the Dow's biggest intraday comeback in more than a year. And while the immediate aftermath of this signal looks positive for the DJIA, data beyond that doesn't look so encouraging for blue-chip stocks.

According to data from Schaeffer's Senior Quantitative Analyst Rocky White, this is the 19th time the Dow has been down by at least a half percent and rallied back to finish positive. Following these previous signals, the index has averaged a one-day return of 0.12% with a 61.1% win rate, versus an anytime return of 0.06% and 53.1% "percent positive." Past this, the performance is less encouraging, with the Dow underperforming at both the one- and two-week marks after such an impressive intraday comeback.

dow returns

However, it's worth noting that the two previous times the DJIA was down at least 0.6% in intraday trading but swung to a win -- on June 16, 2016, and July 6, 2016 -- it was higher one and two weeks later. Widening the scope, the Dow has been higher one-week out in five of the last six occurrences.

dow returns after big swing

Today, the Dow has explored a 74-point range -- last seen trading up 0.2%, following this morning's upwardly revised second-quarter gross domestic product (GDP) reading. While the DJIA is pacing for a second straight win, the S&P 500 Index (SPX) is on track to extend its daily winning streak to four.

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