Archive for October, 2008

S&P500 Hit by Worst Loss Since 1987

Wednesday, October 15th, 2008

October 15, 2008

Down by -9.03 percent, the S&P500 experienced its sharpest one day drop since October 1987. The plunge then was -20.47 percent; while there were some minus eight percent days in between, today’s performance thus is its sharpest in 21 years.

The DJIA mirrors that pattern, although today’s -7.87 percent fall is a smaller number, whereas its 1987 dive of -22.61 percent is worse, and remains the record in recent times.

Finally, the NASDAQ’s -8.47 percent decrease is just the sixth worse since 1987; and at that time it fell by -11.35 percent on October 19, 1987 and then by -9.00 percent on the next day.

The see-saws of the last three and a half weeks, and their magnitudes are unprecedented in recent times. Who is not in search of a generalization, or rule, that can describe these huge fluctuations? An appraisal of the deep losses and the pattern of subsequent changes from 1987 to data could provide insights. The following time graph of the S&P500 since 1987, with the vertical lines indicating the deep loss days, is helpful.

Clearly, the major plunges occur at turning points of the S&P500 index; yet while the first two coincide with subsequent price appreciation, it is easy to conclude that the third incident, of 2000 is two faced, marking either a further increase or initiating a major decline. Moreover, the comparison with the history of the 2000 reversal and the subsequent rise, reveals first, that the present drop has not yet reached the previous low point, and also, that substantial gains hover over the future.

10-15-08-final-two.JPG

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DJIA -7.87 percent

NASDAQ… -8.47 percent

S&P500 -9.03 percent


Record Gains Halt Eight Day Declines

Monday, October 13th, 2008

October 13, 2008

The three indices soared more than 11 percent today! The DJIA and the S&P500 set new records, eclipsing their previous highest daily gains, set on October 21, 1987. The margin is greater by more than 2.5 percentage points for the S&P500 and by a full percentage point for the DJIA. The NASDAQ, however, while not setting a new high water mark, earned today’s high mark, at 11.81 percent.

The NASDAQ greatest gain ever is 14.17 percent. This occurred on January 3, 2001, and that could be a warning. For at that point, the NASDAQ was on its way to an historic catastrophe but still had some way to go, before finally starting its recovery.

On the other hand, the DJIA as well as the S&P500 were near the end of their down moves, and near the start of their recoveries, when reaching their previous records.


DJIA 11.08 percent

NASDAQ… 11.81 percent

S&P500 11.56 percent

Will Unprecedented Drop Continue?

Saturday, October 11th, 2008

October 10, 2008

Finally, the NASDAQ closed higher, its first up day in October. Yet it managed no more than a plus .27 percent on a late afternoon rally that overcame losses near minus seven percent. But the DJIA and the S&P500, which joined the surge, failed to hold their gains, declining more than a full percent.

As a result, the S&P500 set a new downside 21st century record, falling eight days in a row for the first time since 1996. In the 1950 – 1999 period, however, 21 such strings occurred, with 11 continuing for at least one further day.

The DJIA history is similar, although it shows only 17 closes with eight successive negative closes, the last of which took place in September 2001. As for the day following, ten were positive while nine continued to fall for the ninth day in a row.


DJIA -1.49 percent

NASDAQ… .27 percent

S&P500 -1.18 percent

Down Count Goes to Seven

Thursday, October 9th, 2008

October 9, 2008

This does not happen often. Indeed, it is the first time in this century that S&P500 hit the skids seven days in a row! And today’s -7.62 percent loss is only the fourth time, since 1950, that the S&P500 dropped that much in one day. Furthermore, with the exception of the -8.8 percent of Monday a week ago, on September 29, there has been no other since 1987.

Similarly, today’s DJIA’s -7.33 percent plunge is its third deepest in 58 years, recording its first seven down days in a row since 2002. By comparison, the NASDAQ loss of -5.47 percent seems mild; yet with the exception of two recent days –Monday a week ago and the day before yesterday- such sharp reversals last occurred in 2001. As for the frequency of seven down days in a row, today marks just the sixths time since January 2000.

Yesterday’s look at the past failed to indicate today’s market action. As for tomorrow, in the past, the S&P500 has never fallen eight days in a row. While the DJIA experienced this twice in this century, the next days were split evenly with one further decline and one reversal. The NASDAQ, which had five runs of seven successive negative days since 2000, floundered three times for a further, eighth decline, compared to two gains on the next day.

DJIA -7.33 percent

NASDAQ… -5.47 percent

S&P500 -7.62 percent

Declines Extend to Sixth Day

Wednesday, October 8th, 2008

October 8, 2008

Losses ranged from -.83 percent for the NASDAQ to -2.00 percent for the DJIA as the pressure on prices continued for a second trading week. Yet to consider this as a trend, going from five to six negative days in a row, is an understatement of the rarity of prices falling for six days in a row. Yesterday’s analysis focused on the frequency of five straight negative days – about 1.5 percent for the DJIA and the S&P500, and .8 percent for the NASDAQ.

Adding a sixth decline cuts the frequency count in half for the years before 2000. Moreover, looking only at this century, the incidence declines much further. The DJIA drops from 21 to nine days; the NASDAQ falls to 13 from 33, and the S&P500 has just two runs of minus six day compared to 17 occurrences of five successive negative sessions.

Looking at the past to infer what might happen in the future, the S&P500 is the most optimistic, experiencing no seven straight declines in this century. The DJIA, however, has two days of further losses, but seven turnarounds to positive closes. The NASDAQ provides the most worrisome scenario, with five of the six day runs turning into seven straight losing sessions, yet the other eight occurrences turn into gains on the following day.

 

DJIA -2.00 percent

NASDAQ… -.83 percent

S&P500 -1.13 percent

Deep Losses on Fifth Straight Down Day

Wednesday, October 8th, 2008

October 7, 2008


The thrashing continued for another session, with the three indices falling more than five percent, their sharpest drop since the previous Tuesday. While the NASDAQ has 29 previous days with losses exceeding five percent, the S&P500 has only 13 such occurrences while there are 12 for the DJIA.

For the NASDAQ, these days happened mostly in 2000 and 2001 when in its sharpest drop ever, it encountered 20 closes worse than five percent . The losses for the other two indices are more evenly distributed, even though they cluster in the same two years.

Five successive down days are quite rare, with only some 220 since 1950 for the DJIA and the S&P500, or occurring on 1.48 percent of all trading days. But so far, since January 2000, there have been proportionately fewer, accounting for just .77 percent of all closes.

The NASDAQ record, however, of 1.5 percent of all days with five-day losing strings, is twice as many as the other indices.

DJIA -5.11 percent

NASDAQ… -5.80 percent

S&P500 -5.74 percent

What a Time for a Computer Glitch!

Tuesday, October 7th, 2008

October 7, 2008

Will try to have a post tomorrow – thanks for your patience.