Historically Bad Times for the S&P

On November 20th the S&P closed at 752. In the context of the last fifty eight years this is the worst performance the S&P has ever recorded. In 14,368 data points, the past six weeks rank 14,349th to 14,368th with respect to S&P performance relative to its moving averages (20-, 50-, and 200-day MAs). On the day it closed at 752, the S&P finished 19.6% away from its 20-day MA, 33.8% from its 50-day MA and a staggering 65.4% from its 200-day MA. The only other year in recent memory to come as close was October 3rd 1974. Then the S&P closed 7.7% away from its 20-day MA, 16.6% from its 50-day MA and a comparably bullish 40.1% away from its 200-day MA.

For the month of December, taking the past September/October routs into perspective, 1987 was the only other year coming close to matching now. Then the S&P lingered 2% from its 20-day MA, 11% from its 50-day MA and only 25% from the 200-day MA (this was for December 10th 1987).

click to enlarge

Bears and worried bulls could look to December 1973 when the S&P traded 3% from its 20-day MA, 11% from its 50-day MA and 14% from its 200-day MA - only to see the following year perform even worse. Will this be the story for 2009?

The most likely outcome is somewhere in between as the market drifts sideways as the moving averages 'catch up' to the market. One month on from my "Obama Bottom" article, the S&P has completed the Obama unwind and should be in a position to rally from here into the early part of next year. But given the new boundaries of despair the S&P has set I wouldn't be betting big on it.

Just for interest, the best the market performed was November 3rd 1982 when the S&P traded 5% above its 20-day MA, 11% above its 50-day MA and 19% above its 200-day MA. Those numbers appear a million miles away from where the S&P stands now.

Comments

[mcadoo3312:]

With the second chart, the 50 DMA had tested the 200 and failed, sparking a huge selloff. The second chart more resembles what we see right now, but that was also the bottom of that recession. I am not calling a bottom, but the overall technicals of late 1974 look very similar to now.

2008 Dec 03 02:18 PM

[Zignals:]

Errata:

Due to a misplaced cell reference the MA relationships are out (for the 200-day MAs in particular). The context is the same however

Nov 20th: 16% from 20-day MA, 25% from 50-day MA and 40% from 200-day MA
Oct 3rd 1974: 7% from 20-day MA, 14% from 50-day MA and 29% from 200-day MA
Dec 10 1987: 2% from 20-day MA, 10% from 50-day MA and 20% from 200-day MA
Dec 1973: 3% from 20-day MA, 10% from 50-day MA and 13% from 200-day MA
Nov 3 1987: 5% above 20-day MA; 12% above 50-day MA and 23% above 200-day MA

Declan

2008 Dec 04 06:10 AM