Rare Stock Signal About to Flash for First Time Since 2001

The S&P is pacing for its best week in years, right after suffering its worst

by Andrea Kramer

Published on Feb 16, 2018 at 11:48 AM
Updated on Feb 16, 2018 at 11:54 AM

The S&P 500 Index (SPX) last week suffered its worst week since 2016. However, U.S. stocks have been on a tear since then, with the major market indexes pacing for their sixth straight gain, and the SPX on track for its best week since December 2011, up 4.7% so far. Should these gains hold, it would send up a stock market signal not seen since 2001.

S&P Pacing for 10th Signal Ever

Specifically, the last time the S&P suffered its worst week in a year followed by its best week in a year was September 2001, according to data from Schaeffer's Senior Quantitative Analyst Rocky White. Prior to that, you'd have to go back to October 1989 for a signal. In fact, since 1928, there have been just nine other massive weekly swings of this magnitude.

spx worst week then best week

Short-Term Pain, Long-Term Gains May Be Ahead

Historically, these roller-coaster rides have been short-term bearish signals for stocks. The next day, the S&P was down 0.1%, on average, and higher just 22.2% of the time. That's compared to an average anytime one-day gain of 0.03%, with a win rate of 53.8%, looking at data since 1936 (when the first signal occurred).

One week out, the SPX was down 1.29%, on average, and higher just one-third of the time. Again, that's compared to an anytime one-week gain of 0.15%, with 56.6% positive. What's more, Wall Street will also be battling some post-Presidents Day blues early next week, if recent history is any indicator.

That downward trajectory has continued up to one month after a signal, with the S&P higher only 44.4% of the time two weeks and four weeks out, and averaging notable losses over both time frames. For comparison, the index has averaged two-week and one-month anytime gains, with a win rate of 57.9% and 60.2%, respectively.

However, three and six months after signals, the index has outperformed. Specifically, three months later, the S&P was up 2.61%, on average, and higher 55.6% of the time. Six months later, the SPX was up a whopping 6.85%, on average -- handily exceeding its average anytime six-month gain of 3.9% -- and higher nearly 78% of the time.

SPX after signals vs anytime since 1936

From Schaeffer's Pro Traders
Trade Weekly Options Like a Pro

Direct from our Schaeffer's traders, your FREE guide to profiting with weeklies!


 
 

Partnercenter


NEW! Explore Schaeffer’s Partners' deals and get connected to top online brokerages with deals tailored exclusively for our readers.  Get answers to your questions regarding transfer fees, commission rates, programs and available discounts related to online trading services.

MORE | MARKETstories


The Latest Investor's Guide to Precious Metals
Learn how to protect savings and maximize returns by investing in precious metals.
3 Stocks That Just Got Slammed With Analyst Bear Notes
ACB is eyeing its worst session since January
Blue-Chip, FAANG Earnings Hit Ahead of GDP
Harley-Davidson and McDonald's are also set to report earnings
The Latest Investor's Guide to Precious Metals
Learn how to protect savings and maximize returns by investing in precious metals.