History Of DJIA Plunges
Monday, September 29, 2008
It's safe to say that today's decline in the major averages qualifies as a "plunge". A "crash" even.
It's very rare to see selling pressure this great, when the indices are diving to a new 52-week low. It has only happened once in the entire history of the S&P 500, that being Black Monday of 1987.
For the Dow Jones Industrial Average, we have more history, and thus more precedents to judge our current activity. The charts below show the performance of the Dow in the month leading up to a one-day decline of 7% or more to a new 52-week low, and its track over the next quarter.
In the chart immediately below, we bunch them all together to see if there is any method to the madness, and indeed there seems to be. The Dow dropped about 13% on average in the month leading up to prior crashes, and then fell about another 12% on the crash days (the day of the crash in the charts equates to "0" on the horizontal scale). In those respects, our current situation seems relatively tame.
Still, the charts show a consistent pattern of a very short-term bounce-back, followed by extreme volatility which usually led to a longer-term low. We've kind of already seen this pattern with the big declines from two weeks ago, but today was on a whole other level.
As we see in the 1929, 1931 and 2001 charts that follow, a short-term bounce is not guaranteed, but it's consistent enough to expect something similar this time around - and if not, we shouldn't see more than another day of selling before yet another vicious rally attempt.
On Average:
|
1 Day Later |
1 Week Later |
1 Month Later |
3 Months Later |
6 Months Later |
12 Months Later |
| +2.7% | -0.7% | +5.5% | +1.3% | +4.8% | +3.7% |
After 12/181899:
|
1 Day Later |
1 Week Later |
1 Month Later |
3 Months Later |
6 Months Later |
12 Months Later |
| +4.7% | +4.0% | +11.2% | +6.2% | -1.5% | +2.2% |
After 3/14/1907:
|
1 Day Later |
1 Week Later |
1 Month Later |
3 Months Later |
6 Months Later |
12 Months Later |
| +6.7% | +6.2% | +11.1% | +1.4% | -6.6% | -14.8% |
After 12/12/1914:
|
1 Day Later |
1 Week Later |
1 Month Later |
3 Months Later |
6 Months Later |
12 Months Later |
| +3.9% | +0.9% | +3.5% | +1.2% | +10.6% | +71.4% |
After 10/28/1929 and 10/29/1929:
|
1 Day Later |
1 Week Later |
1 Month Later |
3 Months Later |
6 Months Later |
12 Months Later |
| -11.7% | -10.9% | -7.3% | -4.0% | +10.6% | -6.8% |
| +12.3% | +3.5% | +8.5% | +10.2% | +26.6% | +4.8% |
After 9/24/1931:
|
1 Day Later |
1 Week Later |
1 Month Later |
3 Months Later |
6 Months Later |
12 Months Later |
| +1.9% | -10.4% | +0.8% | -23.5% | -23.9% | -51.2% |
After 10/18/1937:
|
1 Day Later |
1 Week Later |
1 Month Later |
3 Months Later |
6 Months Later |
12 Months Later |
| +0.9% | +1.1% | +5.8% | -0.9% | -6.9% | +12.3% |
After 10/19/1987:
|
1 Day Later |
1 Week Later |
1 Month Later |
3 Months Later |
6 Months Later |
12 Months Later |
| +5.9% | +3.2% | +10.6% | +11.4% | +15.0% | +23.1% |
After 9/17/2001:
|
1 Day Later |
1 Week Later |
1 Month Later |
3 Months Later |
6 Months Later |
12 Months Later |
| -0.2% | -3.6% | +5.2% | +10.2% | +19.2% | -8.0% |
© 2008 Sundial Capital Research, Inc. All Rights Reserved. www.sentimenTrader.com