Global Macro Monitor produces informed opinion about markets and the global economy. This was originally published on January 19, 2011
The S&P500 broke its streak of 37 consecutive days without a one percent correction, just barely, however, falling 1.01 percent. Jimmy Rollins can sleep easier tonight. The NASDAQ was down 1.46 percent.
So what’s next? If history is indicative of near-term performance, don’t expect a major sell-off in the next week or two. The table below shows that over the past 20 years there have been seventeen streaks where the S&P500 had not experienced a one percent correction for 37 consecutive days.
The average return over the next five days was 0.59 percent and over the next ten, 0.71 percent. Of the seventeen observations, thirteen experienced positive returns in both of the time periods.
Will history repeat? Who knows, but it certainly may rhyme. The action in F5 Networks –a leader in the recent tech rally — after the bell is extremely ugly. Their revenue miss has clipped 20 percent off the stock. The market seems to be in a selling mode, whether hit or miss.
Commodities also reversed today. We took some pain trying to catch the Mosaic falling knife after the Cargill announcement. The question is does Cargill sniff a top in Ag commodities and trying to top-tick its divestiture?
And we didn’t exactly trade Apple like Joe the MOTU around earnings and the Steve announcement. Apple traded over $355 after the close yesterday. Like many out there today we’re also reaching for the KY.
We’re still in a powerful uptrend until proven otherwise and do think the markets may give us a gift here, especially in tech, and will be looking to buy the “French dip.” No more falling knives, however. Stay tuned!