Great data here from Liz Ann Sonder’s at Schwab:
If news sources want to be the most accurate, they would express yesterday (Monday) in terms of its shock to the system, not its shock to whoever’s reading the comment. To figure out yesterday’s shock to the system, SentimenTrader.com used something called “Average True Range” (ATR), which is just a way to express how much the S&P has typically moved on a given day during a given time period.
The ATR of the S&P 500 over the past three months is 29 points. So, yesterday’s rally of 54 points is about 1.9 times ATR. In those terms, there have been 906 days that matched or exceeded yesterday’s “shock value.”
While it’s not uncommon to see rallies of yesterday’s shock value, it is rare to see them during a bear market after the market has already rallied more than 10%. SentimenTrader.com looked for those days and only a handful popped up. All of those days were all concentrated in late July 1932, marking the explosive end to the worst bear market in history, and again in April and June 1938 as that brutal bear market was ending.
The current two-week rally is the largest since 1938. There were two other distinct occurrences of two-week rallies comparable to the current one: July 1932 and April 1933. Both marked bear market bottoms.
Interesting data. I don’t like to put my weight behind a “handful” of data points, but it’s interesting nonetheless.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.