Two for the History Books
Over the last couple of weeks the market has proven historically unprecedented on two accounts: the length of the death march down and the magnitude of the 1-day bounce afterwards.
October 1987 still reigns supreme as the market’s largest drawdown without a bounce (due mainly to the single day loss on Black Monday), but October 2008 was the most prolonged and painful this market has seen since at least 1950.
Key observation: with only a couple of exceptions, history’s worst death marches ended with a sizeable bounce that continued into the next week.
As the pundits have repeated ad infinitum, on Monday the S&P 500 posted its largest percentage gain in 69 years. It was fitting given the magnitude of the drawdown.
Key observation: the majority of history’s largest 1-day rallies have come after sizeable drawdowns, but without accounting for the state of the market at the time, follow-through after the rally has been mixed.
Note: this is only meant to be brain food and not robust analysis. These are scary markets we are trading in. Be safe out there.
Happy Trading,
ms
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