The Dow took a 'big' 1.8% dive on Monday after Friday's tryptophan-fueled 'big' 1.4% gain to bring the average to a -3.3% five-day rate of change, which because of recent volatility, is no longer considered 'large'. The DJIA closed on Monday at 12,743.44, down 237.44 points on the day. The intra-day actual low pushed into 13-week low territory, probing to depths the market hasn't seen since the August 16 turnaround low day. Monday's close is actually lower than the close on that August meltdown.
The chart looks pretty gloomy, but can the bulls find a reason for hope in history?
Q: How has the Dow performed in the past when it has seen a 'big' percentage decline on the Monday following Thanksgiving?
This is a pretty decent sample, so the confidence is high based on the T-score, which comes in at 4.0. The mean return at the 90% confidence interval is ~2%.
Not to say that there isn't risk. In one of the historical cases (1916) the Dow fell another 16% after this event. You can clearly see this outlier.
You should also check out the basic seasonal tendency for November 26 in the Dow. While there is a weak and insignificant overall bullish tenor to the seasonal, look at the outliers to the down side. They're pretty sharp - so clearly it is possible to see some major meltdowns in the month of December.
If you'd like to play with this edge yourself, you can start with our EventEdge® analysis.
Gibbons Burke is editor of MarketHistory.com.
