Seeking Alpha
Recommended for you:
Registered investment advisor, long/short equity, dividend investing, ETF investing
Profile| Send Message|
( followers)  

After some recent wild market swings, I felt like torturing some numbers. So, I decided to take a look at some of the big up and down days that the market has endured this year. Using the S&P500 (SPX) as the basis for the analysis, YTD inclusive to November 1, 2007, here is what I ascertained:

  • 116 positive days – Total simple aggregate return was 72.18%; simple average daily return was 0.62% per day.
  • 95 down days – Total simple aggregate return was -65.11%; simple average daily return was -.69% per day.
  • 23 days with returns greater than 1% - Total simple aggregate return was 34.24%; simple average daily return was 1.49% per day.
  • 24 days with returns less than -1% - Total simple aggregate return was -43.69%; simple average daily return was -1.82% per day.
  • 4 days with returns greater than 2% - Total simple aggregate return was 9.99%; simple average daily return was 2.50% per day.
  • 8 days with returns less than -2% - Total simple aggregate return was –21.02%; simple average daily return was -2.63% per day.
  • Total net simple aggregate price return for days with return plus/minus 1% is -9.45%.
  • Total price return for the SPX for the year is 6.36%.

So what can we infer about the price action of the SPX from this data? While the magnitude of down days is greater than that of up days, the market still remains higher as the quantity of up days is greater than the quantity of down days. Thus the down days are more taxing than up days but are harder to come by.

Panic tends to come in days of selling rather than during days of buying. How does this compare historically? In 2007, 55% of trading days ended higher while 45% of trading days were in the red. From 1950 through 2006 the SPX ended higher on 53.6% of trading days.

As stated above the average up day returned 0.62% while the average down day returned -0.69%. From 1950 through 2006 for the SPX the average up day was up 0.62% while the average down day was -0.64%.

The SPX has advanced 6.36% so far in 2007 after the November 1 drubbing of -2.64%. This compares to the simple average annual return of 9.37% for that index. Of course 2007 has nearly 2 more months to go.

Thus, for all the chest thumping, foot stomping, shoe banging and emotional outbursts exhibited by bulls and bears alike this year, the simple fact is that the SPX is trading in a manner which is quite typical on an historical basis.

While the data just looks at 2007 versus historical data, I believe that this analysis can be expanded to look at individual years for which we can further parse out and query in multiple ways. Given the chance I will endeavor to do so.

Source: Wild Market Swings: SPX Behaves In A Typical Manner, Historically Speaking