The somewhat alarming part about Tuesday’s stock market decline is that it marks the third – though most severe – decline in a row for the S&P 500 . That’s a trend, and it naturally feeds concerns about how long the weakness could persist and what the damage could amount to.
Bill Luby at VIX and More (via Abnormal Returns) provides a roadmap. Among the 16 most significant pullbacks over the past three years – a period that incorporates the recovering from the 2008-2009 bear market – the median pullback lasted seven trading days and sent the S&P 500 down a total of 5.6 per cent. In that sense, the current pullback is about half done if it conforms to the median average.
“Were we to see a median pullback form this time around, it would suggest a bottom of about SPX 1301 sometime on Friday after the employment report,” Mr. Luby said on his blog.
But there are other ways to crunch these numbers. The mean average pullback over the past three years has lasted 16 days, with a decline of 7.2 per cent. That would send the S&P 500 down to about 1,275 by March 26. And if things get as bad as they did last May, when the S&P 500 slid 21.6 per cent over 109 tortuous days by October, the index would have to slide all the way to 1,080.
In mid-afternoon trading on Tuesday, the S&P 500 was down 21 points or 1.5 per cent, to 1,343.