It was just over one week ago that the S&P 500 closed at its high for the year, and we haven’t had an up day since. Whether it’s fears over a potential Brexit, concerns regarding the economy, or that the FOMC has lost all credibility, investors have become increasingly concerned. Earlier today, it looked like a sixth straight down day was a sure thing, but since European markets closed just before lunch, the S&P 500 has rallied, making it a closer call. As we type this, the S&P 500 just flipped into the green. Looking at the chart below, even with the weakness we have seen over the last week or so, the S&P 500 is still only a little more than 2% off its 2016 closing high for the year. From that perspective, can you recall a time when the S&P 500 was this close to a high for the year but where there was this much angst on the part of investors?
While a six-day losing streak for the S&P 500 is far from a done deal at this point, should we close in the red on Thursday it will be the seventh six-day losing streak since the bear market low in March 2009. In the table to the right, we have listed each of those streaks. For each occurrence, we show the six-day percentage declines as well as the S&P 500’s return the next day and over the next week. As shown, only two of the prior six streaks went on to a seventh down day, and the average return on day seven is a gain of 0.8% (median: 1.2%). Also, in five of the seven periods the S&P 500 was up over the following week for an average return of 0.1%. One of those down periods was in August 2011, and in the days that followed, S&P cut its AAA rating on US sovereign debt. That led to a decline of 13.0% over the next week. On a median basis, however, the S&P 500 has risen by 2.1% over the next week.