Looking At Market Pullbacks

As the market (S&P 500) finally sold off 2 days ago on volume, this finally generating some talk in pullbacks in the market. While this bull market rally from the 2009 low is up over ~100%, the ride up has not been a one way train. There have been many bear markets (+20%), corrections(10-20%), and pullbacks (5-10%) in between.

However, my focus in this post is going to be on pullbacks specifically (click here for more info on bull mark rallies). I want to figure out how long small sell-offs (5-10%) in the market have lasted, and how the bottoms have formed. Below is a weekly chart of the S&P 500 ETF( $SPY) and I’ve highlighted the areas in which the market “pulled back”. I only consider a pullback if it came after a significant market rally both in terms of percentage and time. I don’t want to be looking at pullbacks during bear market rallies (mainly because the temperament of participants is different than during bull rallies).

The Chart

The average pullback (there has been four 5-10% pullbacks) has lasted 5 weeks (if counted from the week after they set the high). The average RSI reading at the bottom of the pullback has been 53.48, which goes to show you that you do not really need to be “oversold” in order to set a bottom. And as you see from the chart below, most of the pullbacks were, on average, right to the 20 week SMA, with two moderately “overshooting”, and one slightly “undershooting”. One last thing, there has been ONE pullback per year since the bottom.

$SPY - SPDR S&P 500 ETF

SPYweekly

 

Tags: $SPY $SPX $DJIA $SDS $STUDY

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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