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Stocks - The Smell of Fear Redux Redux 
COMPTuesday, July 29, 2008
By Gibbons Burke
Friday gave stocks a pregnant pause from the bear's down-swiping claws, but after a weekend to think about it, the bears resumed their relentless attack on equity values on Monday, getting its licks in before the SEC decides that short-selling is an act of terror, banned under the rubric of the Patriot Act.
The Dow Jones Industrial Average (DJIA) fell a 'big' 2.1% on Monday, closing the day at 11,131.08 in a 'trend day' decline where the average opened near the high of the day and closed very close to the low. The average is now down -2.9% over the last five trading days.
The S&P 500 index (SPX) also took it hard - dropping a 'big' -1.9% and closing at the low of the day in it's trend-day decline pattern at 1,234.37, down 2.0% over the last five trading days.
The Nasdaq Composite (COMP) was also down 'big': -2.0% to close at 2,264.22.
Bonds benefitted. In a flight to safety, bond futures (CBT.US) rallied a 'big' 1.1% on the day, closing at 115 1/32.
Q: How have the equity indexes performed after the Nasdaq Composite index (NASD) and the Dow (DJIA) both lose more than 1.75% on either Friday or Monday on a day when there is a flight to quality into Treasury Bonds with the futures up more than half a point?
A:
- S&P 500 - According to the 27 previous occurrences of this event, EventEdge indicates that SPX has shown a weak bullish edge that peaks 26 trading days after the event. Thus, the projected date for the peak of the bullish edge relative to the current event date (Monday, 28 July 2008) is Wednesday, 3 September 2008. SPX rallies in 78% of the cases (21 of 27) by an average of 7.0% relative to the close on the event date. The average of the 6 declines is -5.8%. The overall return of the 27 cases is 4.2%, which, based on the close of SPX on the event date (1234.37), provides a target price of 1286.21.
- Nasdaq Composite - COMP has shown a weak bullish edge that peaks 23 trading days after the event. Thus, the projected date for the peak of the bullish edge relative to the current event date (Monday, 28 July 2008) is Thursday, 28 August 2008. COMP rallies in 75% of the cases (21 of 28) by an average of 8.4% relative to the close on the event date. The average of the 7 declines is -5.8%. The overall return of the 28 cases is 4.9%, which, based on the close of COMP on the event date (2264.22), provides a target price of 2375.17.
- Dow Jones Industrial Average - DJIA.A has shown a weak bullish edge that peaks 21 trading days after the event. Thus, the projected date for the peak of the bullish edge relative to the current event date (Monday, 28 July 2008) is Tuesday, 26 August 2008. DJIA.A rallies in 71% of the cases (20 of 28) by an average of 6.0% relative to the close on the event date. The average of the 8 declines is -4.8%. The overall return of the 28 cases is 3.0%, which, based on the close of DJIA.A on the event date (11131.08), provides a target price of 11465.01.
Note - this is a redux idea - which we have published on several previous occasions. The most recent occurrence has not worked out as well - it fired off on June 20th and has been a downer. June 6th also saw a signal which hasn't paid off well either. History doesn't always repeat, but it often rhymes...
Gibbons Burke2 is editor of MarketHistory.com.
Related Ideas:
- Stocks - The Smell of Fear Redux3 - April 14, 2008
- Stocks - Flight to Quality4 - January 14, 2008
- Stocks - The Smell of Fear Redux5 - September 10, 2007
- Stocks - The Smell of Fear6 - April 18, 2005
- Weekend Worries7 - February 5, 2002
- Dow: Tell me why... I don't like Mondays8 - September 19, 2000
 |
Let variable values:
@ = SPX
theEvent = IF
NASD is down more than 1.75 %
AND
DJIA_ACT is down more than 1.75 %
AND
US is up more than 0.5
AND
{
Date is Friday
OR
Date is Monday
}
THEN 1
ENDIF
Date Day t+5 t+10 t+16 t+17 t+23
03/17/1980 Mon -2.9 -0.2 0.8 1.8 -1.7
04/07/1980 Mon 2.6 -0.4 5.7 6.1 5.9
10/26/1987 Mon 12.3 6.8 6.8 7.9 5.6
11/30/1987 Mon -0.7 5.2 8.5 9.9 11.1
10/27/1997 Mon 7.1 5.0 7.0 7.7 8.9
01/09/1998 Fri 3.6 3.2 8.4 8.5 10.4
08/31/1998 Mon 6.9 8.4 11.3 8.9 4.7
11/30/1998 Mon 2.1 -1.9 3.4 5.6 5.5
10/15/1999 Fri 4.3 9.3 10.4 9.5 13.1
01/24/2000 Mon -0.5 1.6 0.0 -1.0 -4.9
02/18/2000 Fri 0.1 3.4 1.0 3.4 13.5
02/04/2002 Mon 1.6 -1.0 1.4 1.1 6.4
07/19/2002 Fri 0.6 1.9 6.6 4.3 12.0
08/02/2002 Fri 5.1 7.5 9.7 8.2 1.7
08/23/2002 Fri -2.6 -4.0 -7.2 -7.6 -9.1
09/27/2002 Fri -3.2 1.0 8.7 7.6 7.7
12/09/2002 Mon 2.1 0.6 1.9 1.9 3.8
01/24/2003 Fri -0.7 -3.7 -1.2 -1.9 -2.8
03/24/2003 Mon -1.9 1.8 3.1 1.8 4.0
04/15/2005 Fri 0.8 1.2 3.2 2.1 3.8
09/07/2007 Fri 2.1 5.0 6.4 6.4 7.5
10/19/2007 Fri 2.3 0.6 -4.1 -1.3 -5.6
11/26/2007 Mon 4.6 7.7 3.4 3.3 5.1
01/11/2008 Fri -5.4 -3.4 -4.6 -5.3 -3.7
02/29/2008 Fri -2.8 -3.2 1.7 0.8 2.9
04/11/2008 Fri 4.3 4.9 5.6 6.4 5.7
06/06/2008 Fri -0.0 -3.1 -5.9 -5.6 -7.9
06/20/2008 Fri -3.0 -5.0 -7.8 -5.5 -5.0
07/28/2008 Mon NaN NaN NaN NaN NaN
Avg 1.4 1.8 3.0 3.0 3.5
AvgPos 3.7 4.2 5.2 5.4 7.0
AvgNeg -2.2 -2.6 -5.1 -4.0 -5.1
PctPos 60.7 64.3 78.6 75.0 71.4
PctNeg 39.3 35.7 21.4 25.0 28.6
Maximum 12.3 9.3 11.3 9.9 13.5
Minimum -5.4 -5.0 -7.8 -7.6 -9.1
StdDev 3.8 4.1 5.4 5.1 6.4
ZStat 0.4 0.4 0.6 0.6 0.6
Variance 14.8 16.9 28.9 25.5 40.7
29 Occurrences
Let variable values:
@ = NASD
theEvent = IF
NASD is down more than 1.75 %
AND
DJIA_ACT is down more than 1.75 %
AND
US is up more than 0.5
AND
{
Date is Friday
OR
Date is Monday
}
THEN 1
ENDIF
Date Day t+5 t+10 t+16 t+17 t+23
03/17/1980 Mon -3.6 -6.2 -2.6 -1.7 -3.6
04/07/1980 Mon 2.5 -0.2 4.5 4.9 7.4
10/26/1987 Mon 9.8 7.2 6.0 6.5 5.9
11/30/1987 Mon -3.4 1.4 7.3 8.6 10.9
10/27/1997 Mon 6.2 3.6 4.3 4.3 4.3
01/09/1998 Fri 4.0 3.9 10.9 11.8 14.0
08/31/1998 Mon 10.8 11.9 17.4 14.7 7.7
11/30/1998 Mon 4.7 0.9 8.8 11.4 13.3
10/15/1999 Fri 3.1 8.6 15.1 14.4 19.7
01/24/2000 Mon -3.8 5.5 7.9 8.1 12.1
02/18/2000 Fri 3.8 11.2 6.7 3.9 12.0
02/04/2002 Mon -0.5 -5.7 -5.6 -6.7 4.0
07/19/2002 Fri -4.3 -5.4 -0.9 -3.8 6.8
08/02/2002 Fri 4.7 9.1 11.5 8.0 3.6
08/23/2002 Fri -4.8 -6.2 -7.6 -8.7 -11.5
09/27/2002 Fri -4.9 0.9 9.2 7.8 10.6
12/09/2002 Mon 2.4 1.1 1.3 1.5 5.8
01/24/2003 Fri -1.6 -4.4 0.3 -0.6 -1.4
03/24/2003 Mon -2.1 1.4 1.5 1.8 4.7
04/15/2005 Fri 1.3 0.7 3.7 2.9 6.4
09/07/2007 Fri 1.4 4.1 6.8 7.1 9.6
10/19/2007 Fri 2.9 3.1 -5.2 -1.9 -6.0
11/26/2007 Mon 3.8 7.0 2.2 2.4 5.3
01/11/2008 Fri -4.1 -3.7 -5.3 -6.6 -4.4
02/29/2008 Fri -2.6 -2.6 3.1 2.3 4.0
04/11/2008 Fri 4.9 5.8 7.6 8.4 9.0
06/06/2008 Fri -0.8 -2.8 -7.3 -6.9 -8.8
06/20/2008 Fri -3.8 -6.8 -7.9 -5.0 -5.2
07/28/2008 Mon NaN NaN NaN NaN NaN
Avg 0.9 1.6 3.3 3.2 4.9
AvgPos 4.4 4.9 6.8 6.9 8.4
AvgNeg -3.1 -4.4 -5.3 -4.7 -5.8
PctPos 53.6 64.3 71.4 67.9 75.0
PctNeg 46.4 35.7 28.6 32.1 25.0
Maximum 10.8 11.9 17.4 14.7 19.7
Minimum -4.9 -6.8 -7.9 -8.7 -11.5
StdDev 4.4 5.5 6.9 6.6 7.4
ZStat 0.2 0.3 0.5 0.5 0.7
Variance 19.4 30.2 47.0 43.7 54.8
29 Occurrences
Let variable values:
@ = DJIA
theEvent = IF
NASD is down more than 1.75 %
AND
DJIA_ACT is down more than 1.75 %
AND
US is up more than 0.5
AND
{
Date is Friday
OR
Date is Monday
}
THEN 1
ENDIF
Date Day t+5 t+10 t+16 t+17 t+23
03/17/1980 Mon -2.9 -0.4 -0.3 0.4 -3.2
04/07/1980 Mon 2.2 -1.2 5.6 6.3 6.1
10/26/1987 Mon 12.3 5.9 7.2 8.1 6.5
11/30/1987 Mon -1.2 5.4 7.9 9.4 9.9
10/27/1997 Mon 7.2 5.5 6.8 7.9 9.2
01/09/1998 Fri 2.3 1.6 7.0 7.7 9.7
08/31/1998 Mon 6.4 6.4 8.2 6.1 3.3
11/30/1998 Mon -0.5 -4.6 -0.8 0.9 0.7
10/15/1999 Fri 4.5 7.1 7.0 6.0 8.6
01/24/2000 Mon -0.6 -0.9 -2.6 -4.1 -8.3
02/18/2000 Fri -3.5 1.4 -2.7 -4.0 6.3
02/04/2002 Mon 2.0 0.6 4.5 4.3 9.1
07/19/2002 Fri 3.1 3.7 8.4 5.8 11.7
08/02/2002 Fri 5.2 5.6 7.3 6.2 -0.4
08/23/2002 Fri -2.4 -4.0 -7.5 -7.9 -9.9
09/27/2002 Fri -2.2 1.9 10.9 9.7 9.4
12/09/2002 Mon 1.8 0.2 1.6 1.5 3.7
01/24/2003 Fri -0.9 -3.3 -1.1 -1.6 -3.0
03/24/2003 Mon -2.7 1.0 2.3 0.5 1.1
04/15/2005 Fri 0.7 1.0 2.9 1.9 3.7
09/07/2007 Fri 2.5 5.4 7.4 7.1 7.4
10/19/2007 Fri 2.1 0.5 -4.0 -1.6 -5.3
11/26/2007 Mon 4.5 7.7 3.8 3.6 4.9
01/11/2008 Fri -4.0 -1.8 -2.7 -3.2 -1.8
02/29/2008 Fri -3.0 -2.6 2.2 1.3 2.9
04/11/2008 Fri 4.3 4.6 5.2 5.6 4.6
06/06/2008 Fri 0.8 -3.0 -7.0 -6.8 -8.0
06/20/2008 Fri -4.2 -5.2 -7.4 -5.1 -4.2
07/28/2008 Mon NaN NaN NaN NaN NaN
Avg 1.2 1.4 2.5 2.4 2.7
AvgPos 3.9 3.7 5.9 5.0 6.3
AvgNeg -2.4 -2.7 -3.6 -4.3 -4.9
PctPos 57.1 64.3 64.3 71.4 67.9
PctNeg 42.9 35.7 35.7 28.6 32.1
Maximum 12.3 7.7 10.9 9.7 11.7
Minimum -4.2 -5.2 -7.5 -7.9 -9.9
StdDev 3.9 3.8 5.3 5.1 6.2
ZStat 0.3 0.4 0.5 0.5 0.4
Variance 15.2 14.6 28.2 26.0 38.1
29 Occurrences |
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