Are Three Consecutive 1% Moves by $SPX Significant? (Preview)

By Lawrence G. McMillan

In the past week, the Standard & Poors 500 Index ($SPX) had a huge rally.  Specifically, it rose by more than 1% for three consecutive days – for the first since October, 2011.  On the surface, it seems that this is a powerful move that should inspire further gains.  But I prefer to see hard facts, and so we ran the data on these types of moves.

Since 1950, there have been 31 such occurrences.  Three times there have been one percent moves for four days in a row, and once there was five days in a row.  Whether it was three, four, or five, it just counts as one occurrence for the purposes of this study.

In case you’re wondering, the five in a row occurred when the market was coming off the bottom of the 1969-1970 bear market.  The bottom had actually been put in, in July 1970, but there was a pullback in August.  From there the market turned higher and advanced by more than 1% on every trading day from August 18^th through August 24^th.  That was one of the more bullish occurrences, as $SPX continued to rally – rising 5% in a week, 10% in a month and a half, and 24% in six months (after the third day of 1% gains).

However, all the occurrences have not been nearly that bullish.  One of the worst was in early January 2009.  The market turned down with a vengeance, even after the strong 3-day move. $SPX lost 6.6% in a week, 13.6% in two weeks, and 22% in two months.  That brought $SPX to the lows of the 2007-2009 bear market, though, and another spate of three 1% days in a row occurred on April 2, 2009.  That one was bullish as it came right after the market lows...

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