S&P500 Ends Its Deepest and Third Longest Correction in History

Thursday, 11 April 2013

New All-Time Intraday High on S&P500

Yesterday the S&P500 made the long awaited all-time intraday high, beating its previous maximum of 1576.09 from 11 October 2007. It took 1,382 trading days (about 5.5 years), which makes the “correction” that just ended the third longest in available S&P500 history (data since 1950, index started in 1957). In the table below you can see 15 longest corrections:

S&P500 New Intraday All-Time High after Longest Time

On the right side in the table you can see where the S&P500 closed in the days following the new all-time intraday high (always relative to the old intraday high). You can see that there is no statistically significant tendency to either side.

One thing that is interesting is the relatively low volatility after the new record (many closes within 1% and even 0.5% from the old record), although it is not that surprising, because new all-time highs after long time typically happen during long lasting bull market. Of course, the sample is very small and the circumstances were very different each time, which severely limits the usefulness of this statistics for predicting future market moves.

There have been only two other periods in history when the S&P500 was failing to make new all-time high for longer than 5 years. One more occurrence saw a correction of 819 trading days (a little over 3 years) and all the others were around 2 years or shorter.

Deepest Correction in S&P500 History

The most recent correction was the deepest in S&P500 history. The market dropped 57% from the 2007 all-time high (1576.09) to its lowest close on 9 March 2009 (676.53; the intraday “devil’s” low of 666.79 occurred one day earlier). Below you can see 15 deepest corrections in S&P500 history (not surprisingly most of them were also among the longest ones):

S&P500 New Intraday All-Time High after Biggest Correction

Dow Jones Industrial Average Longest and Deepest Corrections

Below you can see similar tables for the Dow Jones Industrial Average, based on data going back to 1896 (OHLC data only since 1928). During most of the history, the Dow was the most watched of the stock indices, surpassed in importance by the S&P500 only in the last decades (compare the attention media paid to the S&P500 all-time high vs. the Dow high). The correction on the Dow that ended on 5 March 2013 was the sixth longest and the second deepest in history (rank 1 is the one that followed after the 1920-1930’s crisis).

DJIA New Intraday All-Time High after Longest Time

Performance in the days following new intraday all-time highs on the Dow Jones shows slightly bullish bias, although only if you take the 9 longest corrections, 4-5 days after.

DJIA New Intraday All-Time High after Biggest Correction

Data source: DJIA 1896-1928 Economagic; DJIA since 1928 and SPX Yahoo Finance.