S&P Declines, from Kim Zussman
The two recent 1% plus declines in the SPY (07/20 and 07/24) were separated by an up day. It turns out there have been no other 1% plus down-up-down combinations like this since October '05. Below, I have charted them back to January '03, with returns for the next one, two and three days:
Date 1d 3d 5d
10/20/05 0.004 0.017 0.004
05/12/05 -0.002 0.014 0.029
03/15/04 0.005 0.017 -0.010
09/24/03 -0.008 -0.002 0.010
07/21/03 0.009 0.002 0.016
06/27/03 0.000 0.022 0.031
06/25/03 0.013 0.001 0.023
02/26/03 0.013 0.010 0.002
01/24/03 -0.014 0.001 -0.004
avg 0.002 0.009 0.011
sd 0.009 0.009 0.015
z 0.732 3.159 2.299
Andrew McCauley adds:
So far this year there have been seven declines of 20 points or more in S&P 500 futures. On all occasions the next day provided a positive outcome.
avg 1.00%
n 7
sd 0.71%
t 3 (versus all other one day returns for 2007)
Referring to Dr. Zussman's previous post, a case of "buying the dips before they occur."