With last month’s failed (so far) breakout in the U.S. equity market, stocks are relegated once again to range-bound status. Essentially the market has gone nowhere since the beginning of the year and, by some measures, 2015 has been the quietest start to a year in over a century. One characteristic of the stagnant action has been a lack of out-sized daily moves in the market, up or down. Specifically, as detailed in today’s Chart Of The Day, June 1, 2015 marked 111 days since the S&P 500 last had a 2% daily gain or loss. This is the index’s longest streak without a 2% day since the one that ended on June 1, 2012 at…111 days.
So what is the significance of this streak? Is the market “due” for a big up or down day? Well, since 1950, the median length of time in between 2% days is 42 days, or about exactly 2 months. The S&P 500 hasn’t even had a 2% day this year. Its last 2% day came on December 18th (the 2nd of 2 consecutive 2% up days). So in a way, yes, the market is due for a big move.
However, a market’s micro-environment tends to be more persistent than one may expect. That is, high volatility periods tend to persist and low volatility periods tend to persist. Yes, one extreme usually leads the other, but not always right away. For example, the S&P 500 once went 680 days, from October 2003 to June 2006 without a 2% day. On the flip side, the S&P 500 went almost the entire back half of 2011, from July 27 to January 5, 2012, where it never even experienced a double digit streak of days without a 2% move. Thus, we wouldn’t necessarily hold our breadth waiting for the environment to change, i.e., the next 2% day to occur.
As far as historical streaks go, here are some more facts and figures:
- Since 1950, there have been 40 other streaks of at least 100 days without a 2% move in the S&P 500.
- The median of those 40 streaks was 187 days.
- 19 of the streaks ended with a 2% up day; 21 ended with a 2% down day.
- 9 of the last 10 streaks ended with a 2% down day.
What is the takeaway? There likely is nothing predictive here. The major point is probably that the markets have been pretty dull, or at least lackluster, during the first half of 2015. As we mentioned, while the market is long “overdue” for a big move, these environments tend to persist. So the fact that the streak is a long one doesn’t imply that its end is imminent (although, certain patterns, e.g., wedges, among the indexes do not have much longer before they reach their apex, suggesting a breakout one way or another.)
In the end, this one may be just more a bit of trivia than anything else.