Two Day Declines: No Sweat Off This Bull's Back

Hickey and Walters (Bespoke) submit: While much has been made of the market's declines over the last two days, the chart below shows that these types of declines have actually been common. Since the start of the bull market in October 2002, there have been 119 occurrences where the S&P 500 declined by 1.25% or more over a two day period. This works out to roughly once every two weeks.

One possibility for the increased investor anxiety this time around could lie in the fact that before yesterday, the last occurrence was in late March, making this the seventh longest stretch during the bull market that the S&P 500 went without a two day decline of more than 1.25%.

click to enlarge

Comments

[DEcho:]

Seems like today might be another decline day. Is so, it would be very interresting to see a follow up article on three day declines..

2007 Jun 07 12:29 PM

[John Gaats:]

Fear grabs everywhere in the market. Good stocks are asked at basement price. Please tell me when this is going to be over. I would like to buy a lot just before that

2007 Jun 07 01:41 PM

[Solution:]

No fear, VIX is only 16.67, VXN is 18.98. It was above 20 for VIX and 25 for VXN in Mar.

2007 Jun 07 03:56 PM

[ToddC:]

Here's an analysis using SPY price data going back to 1/29/1993:
Trading Days: 3616
% of Days with > 1% loss: 12.09%
% of Rolling Three Day Periods with > 3% loss: 4.15%
% of Rolling Five Day Periods with > 5% loss: 1.77%

2007 Jun 07 08:00 PM

[Malkiel:]

You guys are the perpetual breath of fresh air when it comes to cutting through market myth and hype. Thanks for applying the scientific method to an otherwise "faith-based" market culture.

I'm not the paranoid type, but a lot of this market behavior smacks of big institutional buyers needing discount points and taking their cue on how to create them by some clever consensual dumping. Not consensual in the overt illegal sense perhaps, but rather in reading the cues and knowing how one's peers will behave when they want the same result...

2007 Jun 08 10:55 AM

[DEcho:]

Agreed about the quality of this site. I especially like Bespoke' and David Fry's articles.

As for market manipulation, your proposal would seem very risky in my eyes. I'm only a retail investor, so I wouldn't know the inner workings of the investment houses, but dumping your holdings in the hope of other participants will be doing the same, on the basis that there would be some unspoken agreement to dump prices seems kind of far fetched. There are after all fundamental reasons for the latest correction; bond yields and storm in middle-east...

2007 Jun 08 11:26 AM