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Big Days and Future Market Performance

by: Bespoke Investment Group August 07, 2008 | about stocks: IVV / SPY    

Bespoke Investment Group

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An earlier post we did on 300 point days garnered a lot of commentary.  Incorporating the feedback from the comments section, we analyzed the performance of the S&P 500 following big percentage gains.  Since not everyone agrees with the standard definition of a bull and bear market (gains or losses of 20% or more), instead of analyzing when these big days are more likely to occur, we calculated what the average performance of the market was following all big up days.  After all, all we really care about is where the market is going. 

In the table below we show the average performance of the S&P 500 following one-day gains of more than 2%, 3%, 4%, and 5% since 1945.  The 2% category includes all gains of 3%, 4%, and 5% etc.  In the bottom row, we also calculated the average performance of the S&P 500 following all days since 1945. 

As shown in the table, the average return following big days has exceeded the average overall return in every scenario except one (the week following 5% days).  While we won't go as far as to say that big days are a clear sign of a strong market going forward, based on these parameters, we find it hard to make the argument that they are bear market indicators.

click to enlarge

Large_one_day_gains

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This article has 2 comments:

  •  
    Aug 07 05:58 PM
    What about what the market did after large percentage moves to the downside?
    Reply
  •  
    Aug 07 09:31 PM
    You guys are ausome, present past facts (that are very interesting btw...) and let the reader decide. You don't sell anything or try to cover your positons. Thank you!!!
    Reply
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