Typically, a strong thrust off a multi-month low is a good sign going forward.  But most often, we see excessive pessimism at the time of the low (that's highly questionable this time), and at least initially, volume is stronger than it has been the past two days.

With the S&P 500 up another 1% at the moment (that could obviously change before the close), let's go back to 1962 when intraday data became more reliable and look for any time that the S&P hit a two-month low, then enjoyed back-to-back 1% gains.

The table below shows all 31 occurrences, along with the number of days (and maximum loss and gain) until it reached another two-month low.

 

S&P 500 Performance After It Hits A Two-Month Low Then Has Consecutive 1% Up Days
Date	Days 'Til New 2-Month Low	Max Loss	Max Gain	Major Low?
05/31/62	10	-7.4%	0.6%	NO
08/31/66	26	-4.7%	4.8%	NO
05/28/70	252	-5.3%	41.5%	YES
02/12/73	9	-2.8%	2.5%	NO
12/07/73	44	-5.7%	4.6%	NO
09/17/74	9	-4.2%	5.6%	NO
03/31/80	213	-3.1%	39.1%	YES
06/23/82	27	-4.2%	2.0%	NO
02/27/84	60	-3.5%	1.8%	NO
10/21/87	32	-14.4%	0.0%	NO
12/08/87	108	-0.7%	16.1%	YES
08/27/90	20	-5.6%	1.6%	NO
10/01/90	8	-5.0%	1.5%	NO
10/15/90	282	-1.8%	31.3%	YES
06/05/98	7	-3.3%	1.1%	NO
08/18/98	8	-5.8%	0.5%	NO
02/01/00	14	-4.5%	2.5%	NO
02/29/00	106	-2.0%	13.7%	YES
03/26/01	7	-4.6%	2.7%	NO
07/26/01	17	-3.9%	1.9%	NO
01/31/02	3	-3.4%	0.0%	NO
02/11/02	51	-3.4%	5.6%	NO
09/26/02	3	-6.4%	0.0%	NO
10/11/02	54	-0.8%	14.2%	YES
02/18/03	15	-5.2%	0.1%	NO
10/27/04	60	-0.4%	8.2%	YES
11/28/07	28	-5.5%	3.7%	NO
01/24/08	30	-3.6%	3.3%	NO
07/17/08	42	-5.4%	4.2%	NO
09/19/08	7	-11.8%	0.0%	NO
11/24/08	57	-7.4%	10.8%	NO
Median	27	-4.5%	2.7%

In 7 out of the 31 cases, the S&P was higher when it next reached a two-month low, so for those instances I considered it to be a major bottom.  That means that 77% of the time, it was a false start and the S&P ended up trading lower than where it was before the consecutive 1% up days.

The average (median) number of days until it hit a new multi-month low was 27, or 22 when we except the major lows.  So about half the time, the S&P sunk to a new low within a month's time.

On average, the S&P managed to climb about another 2% max before rolling over, though there was a wide variation in that.  Most consistently, though, during the major bottoms, the S&P really didn't give very much back after the 1% up days; it just kept right on climbing.

That makes the next few days a good tell - if the index can keep chugging along, then the intermediate-term picture will brighten considerably.

Jason Goepfert