The S&P 500 Snapped a Key Streak--Now What?

The SPX's gains in the last two months bodes well for the recent pullback

Senior Quantitative Analyst
Aug 9, 2023 at 8:00 AM
facebook X logo linkedin


The S&P 500 Index (SPX) fell 1.4% last Wednesday, ending a streak of 47 straight trading days (a little over two months) without a 1% pullback. The last such streak occurred before Covid in December of 2019. Facts like this tell us a little bit about the trading environment we’re in and offer insight into where we might go next.

47 Days Since a 1% Pullback

I went back to 1950 and found each time the streak got up to 47 trading days. The first table shows how the SPX performed after this point. The recent occurrence was the 62nd signal since 1950. These streaks typically occur during a steadily rising stock market. The short-term returns are good after the 47th day, with the SPX gaining an average of 0.31% over the next week with 62% of the returns positive. Compare that to a typical index return for that timeframe of 0.17%, with 57% of the returns positive. The longer-term returns, however, weren’t as good. They were still positive over half the time, but there was less upside, so the average and median returns were lower from two weeks onward.

SPX Pullback

During this 47-day streak, the S&P 500 gained just over 10%, which was the seventh highest return out of the 62 occurrences. The average return during the streak was 6.3%. I broke up the returns based on whether the S&P 500 was especially strong (8% or more) during the streak and compared that to the other times. It has been good news when the index performed strongly during the streak. The S&P 500 did significantly better going forward after these instances; a month after these streaks, the SPX averaged a 1.33% return over the next month, with 60% of the returns positive. When the index wasn’t as strong during the streak, it averaged a return of just 0.09% with barely half of the returns positive.

SPX Streak

When the Streak Ends

In the analysis above, it shows 47-day streaks without a 1% pullback on the S&P 500 were generally followed by strong short-term returns but with limited long-term upside. When stocks were especially strong during the streak, like the recent instance, stocks outperformed afterwards, in the past. But this streak ended last Wednesday, so next I looked at how the S&P 500 performed after the streak ended. I want to know if the end of the streak tends to be the end of strong stock market returns, or if the weakness on the one-day pullback was confined to that one day.

The first table shows S&P 500 returns after the streaks end. The second table, again, shows typical index returns for comparison. The next day after that first 1% drop tended to be weak and that was the case with the recent occurrence too as the S&P 500 fell 0.25% on Thursday. After that, however, the returns are very close to anytime returns.

SPX Streak Snapped

 

Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

Start targeting gains like the ones our subscribers have seen recently, including:

213.3% GAIN on AutoNation calls
100.0% GAIN on Monster Beverage calls
100.4% GAIN on Walgreens Boots Alliance puts
100.4% GAIN on ON Semiconductor calls
257.7% GAIN on Dell calls

101.0% GAIN on Apollo Global Management calls
103.6% GAIN on JP Morgan  Chase calls
105.3% GAIN on DraftKings calls
101.3% GAIN on Airbnb calls
203.0% GAIN on Shopify calls
102.0% GAIN on Cboe Global Markets calls
100.9% GAIN on Boeing calls
102.1% GAIN on Microsoft puts
102.3% GAIN on First Solar calls
101.5% GAIN on PulteGroup calls
101.0% GAIN on Apple calls
209.4% GAIN on NXP Semiconductors calls
100.8% GAIN on Uber Technologies calls
100.4% GAIN on Academy Sports and Outdoors puts
102.2% GAIN on Trade Desk calls
100.8% GAIN on DoorDash calls
100.0% GAIN on Camping World Holdings puts
100.0% GAIN on Cboe Global Markets calls
100.2% GAIN on C3.ai calls
238.5% GAIN on Oracle calls

 
 
 


 
 

Rainmaker Ads CGI