10th Worst A/D In Ten Years

Yesterday's weakness, as we displayed yesterday afternoon, was about as bad as it has been on record.  Not in terms of index points, but rather in terms of how many stocks in the S&P 500 declined.  After the closing prices were received, we compared the net Advancers on the S&P to other periods in the last ten years and noted that there were only eight instances worse than yesterday.  Surprisingly enough, of the ten periods shown below, SIX of them have occurred during the current bull market (these are highlighted).  Furthermore, only one of the periods (9/3/02) occurred during a bear market.  We speculate that increasing hedge fund activity and similar investment strategies can cause stocks to correct together.  In other words, when one fund begins to take its profits the others follow suit. 

We also note the 10Day moving average, and while negative in most of these periods, the MOST negative periods for the 10Day occur during long periods of intermediate declines.  These sharp universal declines, like yesterday, appear to be part of a healthy bull market.

Comments

[Norman]

Its the ETF phenomena. You don't like the market you sell your SPY's (or go short) and ALL of the stocks in it need to be sold. Any comments?

[Cleve]

Norman:
Sort of...Many funds are pegged to, or attempt to mirror the S&P 500, so they're not necessarily selling SPYs, but yes it's the same phenomenon. Buy and sell programs are always increasing in popularity as well, and when the market starts to move they will unload large baskets of stocks. This causes smaller movements in many stocks instead larger movements in a few.