For just the 22nd time in the last ten years, the S&P 500 has rallied more than 1.5% for two days in a row. Below we highlight the prior times it has occurred along with the change in the index over the next day, week, and month. As shown, the last time it happened was March 24th, 2007. In the week following that 2-day rally, the index was down 2% over the next week, but up 2% over the next month. The median change on the following day has been -0.18%, while it has been -0.57% and -2.10% over the next week and month. Based on the last ten years worth of data, two strong up days have typically been followed by slightly weaker-than-normal performance.
Do you really believe that stocks have memory and future stock market performance is a function of the past events? Forget about it!
I think tomorrow’s GDP and employment numbers will determine the next day, next week and next month performance. Forget about your two days of 1.5% gains analysis, because it will not matter.
If we get much stronger than expected GDP and employment numbers, the bears can kiss goodbye to their “bear market” fun. If we get inline numbers, the current manic-depressive up and down 200-points action will continue for some time. If we get the nasty numbers, look out below ...
Posted by: Vinny | July 30, 2008 at 06:59 PM