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Inflection Point Investing LLC
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Inflection Point Investing LLC is a Registered Investment Advisory firm in New York City.
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Inflection Point Investing LLC
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  • S&P 500 Returns Following Down Mays
    What happens to the S&P 500 following down months of May? To answer that, I searched through S&P 500 prices for the last 60 years.


    The S&P 500 lost 8.20% this past May. Since and including 1950, there have been 25 other times that the S&P 500 went down in May. In the Junes that followed those 25 negative Mays, the S&P 500 went up 12 times and down 13 times. That does not look much like any sort of trend. What about the returns for the remainder of the calendar year for the S&P 500 for those negative Mays? Well there something interesting seems to have happened.
     
    Following down Mays, the S&P 500 went up 17 times and down 8 times for the full year. On average, the S&P 500 returned 3.54% following down Mays. However, when the S&P 500 lost 2.5% or more in May, the S&P 500 went up 11 of 13 times returning on average 7.13% for the rest of the year.

    It is important to note that these are observations; history can be a guide but only that. Indicators help when placing market bets, but risk management still needs to be rigorously applied especially when sizing the bets..

    Authored by Tom Henderson, Strategist JBH Capital.



    # of  End of May till% Return
    Down % MayYear EndFrom June 1st
    MaysYearReturn(up / down)Through Year End
         
     2010-8.20--
         
    11962-8.60up5.82
    21956-6.57up3.25
    31970-6.10up20.38
    41984-5.94up11.09
    51966-5.41down-6.73
    61967-5.24up8.30
    71971-4.16up2.47
    81951-4.06up10.46
    91982-3.92up25.71
    101974-3.36down-21.45
    112006-3.09up11.67
    121979-2.63up8.94
    131999-2.50up12.86
    141977-2.36down-1.06
    152000-2.19down-7.06
    161973-1.89down-7.05
    171998-1.88up12.69
    181976-1.44up7.27
    191983-1.24up1.56
    202002-0.91down-17.55
    211965-0.77up4.54
    221953-0.32up1.10
    231981-0.23down-7.57
    241969-0.22down-11.02
    251955-0.13up19.97
         
         
       17 upAverage % Return
       8 down3.54% (all 25)
         
        Average % Return
        when May was down
        at least 2.5%
        7.13%


    Disclosure: Small Long and Short S&P 500 exposure. Most assets are in cash.
    Tags: SPY
    Jun 09 4:10 PM | Link | Comment!
  • S&P 500 Two - Day Drops of 4.75%, Returns on the 3rd Day and 1 Month Later
    The S & P 500 has dropped about 4.75% for the two day period ending June 7th, 2010. Since 1950, the S & P 500 has dropped by this percentage or a larger percentage 65 times (including the June 7th period). The drops on average have been 6.81% with a range of 4.75% and 24.57%. With this in mind, I was curious about a few things:
     
    What was the return on the index on the third trading day after the two day drop of 4.75% or more?

    What was the return on the index about 1 month these two day drops?

    What was the return on the index one month after a two day drop of 4.75% or larger, if on the third day following such a drop, the S & P 500 went up?

    On the third day after a two day loss of 4.75% or more in the S & P 500, the index went up 39 times and down 25 times. On average it went up 0.71% with a range of 11.58% and -20.47%.

    One month after the two day loss of 4.75% or more in the S & P 500, the index was up 38 times and down 26 times. On average it went up 1.37% with a range of 20.99% and -23.57%.

    If the S & P 500 is up on the 3rd day, following a 2 day drop of 4.75% or larger, then one month later, the S & P 500 is up 28 out of 39 times or 72% of the time.  On average, one month after, it is up 4.06% with a range of -15.94% and 20.99%.

    Authored by Tom Henderson, Strategist JBH Capital.

     

     

    DatePrice at the End% Change% change% change
    at End of 2 Daysof 2 Day DropOver 2 Dayson third day1 Month Later
         
    6/7/20101050.47-4.75-?
    3/30/2009787.53-5.441.3110.83
    3/3/2009696.33-5.272.3820.99
    3/2/2009700.82-6.91-0.6419.06
    2/17/2009789.17-5.51-0.10-8.82
    2/10/2009827.16-4.770.8012.65
    1/30/2009825.88-5.52-0.05-15.14
    12/2/2008848.81-5.292.589.26
    12/1/2008816.21-8.053.9914.16
    11/20/2008752.44-12.426.3215.84
    11/19/2008806.58-5.19-6.7110.08
    11/17/2008850.75-6.640.986.31
    11/12/2008852.3-7.286.923.22
    11/6/2008904.88-10.032.890.53
    10/27/2008848.92-6.5210.795.57
    10/23/2008908.11-4.91-3.45-5.59
    10/22/2008896.78-8.991.26-5.01
    10/16/2008946.43-5.17-0.62-9.23
    10/15/2008907.84-9.524.25-6.29
    10/10/2008899.22-8.711.582.22
    10/9/2008909.92-8.62-1.182.32
    10/8/2008984.94-6.81-7.62-6.67
    10/7/2008996.23-9.37-1.13-6.55
    10/6/20081056.89-5.15-5.74-14.38
    10/3/20081099.23-5.33-3.85-12.09
    9/29/20081106.42-8.55.42-15.94
    9/23/20081188.22-5.33-0.20-23.57
    8/5/2002834.6-5.662.995.34
    8/2/2002864.24-5.2-3.431.59
    7/23/2002797.7-5.95.7317.95
    7/22/2002819.85-7-2.7017.42
    7/19/2002847.75-6.43-3.2912.14
    7/10/2002920.47-5.780.75-1.81
    9/21/2001965.8-4.953.9012.85
    9/18/20011032.74-5.47-1.613.47
    3/12/20011180.16-6.691.480.28
    4/14/20001356.56-7.543.317.06
    1/4/20001399.42-4.750.191.78
    10/1/1998986.39-5.971.6412.69
    8/31/1998957.28-8.183.863.04
    8/28/19981027.14-5.26-6.802.10
    10/27/1997876.99-7.755.128.94
    8/16/1990334.43-4.850.12-4.18
    10/13/1989333.65-6.542.761.77
    1/11/1988247.49-5.2-0.843.42
    1/8/1988243.4-5.981.682.34
    11/30/1987230.3-5.650.747.62
    10/27/1987233.19-6.060.04-1.24
    10/26/1987227.67-8.292.425.57
    10/20/1987236.83-16.239.102.18
    10/19/1987224.84-24.575.336.76
    10/16/1987282.7-7.38-20.47-12.71
    10/15/1987298.08-5.23-5.16-17.59
    9/12/1986230.67-6.630.552.27
    9/11/1986235.18-5.04-1.920.13
    11/19/197468.2-5.16-0.44-0.81
    11/18/197469.27-5.19-1.54-1.98
    9/13/197465.2-4.891.6311.56
    9/4/201068.89-4.82.87-9.51
    1/9/197493.42-4.74-1.10-2.95
    11/20/197398.66-5.031.11-4.17
    5/28/196255.5-8.454.65-1.96
    9/26/195542.61-6.122.28-0.75
    6/27/195017.91-6.431.12-2.29
    6/26/195018.11-5.48-1.10-4.64



    Disclosure: Very small long and short exposure to the S & P 500.
    Tags: SPY
    Jun 08 1:04 PM | Link | Comment!
  • 1,065 & 1,056: Two Very Critical Price Points on the S&P 500

    After what can only be described as another disappointing and highly bearish close for U.S. equities on Tuesday, we are quickly approaching two important downside price areas on the S&P 500: 1,065 and 1,056. 1,065 (1,065.59 to be exact) marks the intra-day lows from last Wednesday - should this level be breached on a closing basis, it would open the door to a quick re-test of the lows put in place early last week and in early February. Considering the rather bearish action seen over the past two trading days and the dearth of any remaining leadership names, we feel that such a move could happen any day.

    Another important price point to watch on the S&P 500 is the closing low from February 8th: 1,056 (1,056.74 to be exact). A close below this level would be devastating for those still bullish as it would mark the first time that we would have a long-term lower low made on a closing basis. The last time equities closed below 1,056.74 was last November.

    Although some may argue that a bear market does not officially begin until we see a 20% move off the highs, we feel that such a definition is too vague and too loose. As trend traders, we instead choose to define a bull market as a series of higher highs and higher lows and a bear market as a series of lower highs and lower lows. Such definitions are a more exacting and simple way to understand bull and bear trends.

    Looked at from this context, a close below 1,056 would, in our view, mark the official end to the cyclical bull in place since last Spring. Should this level be taken out, expect a quick and devastating break to 1,000 on the S&P 500. With the S&P 500 leading the way to the downside over the past month, expect the other major indexes to quickly follow suit with equally violent downside moves.

    We continue to remain in a very defensive posture for the accounts we oversee and advise all followers to dramatically reduce your exposure to equities on all and any pull-ups in the coming days. As recommended in this past weekend's edition of our newsletter, The Inflection Point, going long the reverse S&P 500 ETF, SDS, on pullbacks, will help you play this expected downside in the S&P 500.



    Disclosure: Long SDS and long calls on SDS
    Tags: SDS
    Jun 01 5:20 PM | Link | Comment!
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