22/04 Indices, page-12

After a 6-day tumble, history says gains can take time

Apr 23, 202403:16 GMT+10

SPX+0.87%CL1!−0.39%GOLD−2.75%RUT+1.02%
KEY POINTS:

• U.S. equity indexes rise: Nasdaq out front up ~0.9%
• Financials lead S&P 500 sector gainers; Materials weakest group
• Dollar ~flat; bitcoin rallies; crude slips; gold down >2%
• U.S. 10-Year Treasury yield ~flat at ~4.62%

AFTER A 6-DAY TUMBLE, HISTORY SAYS GAINS CAN TAKE TIME
While Wall Street is attempting a come-back on Monday, Adam Turnquist, chief technical strategist at LPL Financial, looked at the history of 6-day sell-offs to estimate what might happen next, in case the past is any predictor of future market moves.
The backdrop for his research was a 3.1% weekly decline last week for the S&P 500 SPX, which ended the week with its sixth consecutive day in the red, which was its longest period of consecutive daily losses since October 2022.
"Sustained selling pressure of this magnitude is historically rare," said Turnquist, pointing to the widespread nature of losses with declining shares outpacing advancers by a ratio of around 2:1.
All the way back to 1950, he writes that six-day losing streaks occurred in only 3.7% of all six-day periods with the longest losing streak reaching 12 days in November 1966.
Turnquist put the odds of the 6-day sell-off becoming a 7-day event at about 40%. And he said that after a 6-day tumble the next week's returns have averaged at 0.3%.
But on the bright side, history would suggest that the longer investors wait, the more constructive returns could be.
This is because, looking back, the average and median 12-month returns after six-days sell-offs centered around 13% while 79% of occurrences have yielded positive results.
And his research shows that for the month after such sell offs, the median gain looks like 1.4% while this rises to 3.4% for the 3-month timespan