The Dow Jones Industrial Average is down 33% since October 30th of last year; the other indexes have fared worse - the S&P 500 index is down 37.7% and the Nasdaq Composite index is down 39.7%.
Q: How have stocks performed in the past when the indexes are down 20% or more over the last year on the close on the day before Halloween?
A:
Dow Jones Industrial Average (DJIA) - According to the nine previous occurrences of this event, EventEdge indicates that Dow has shown a very strong bearish edge that peaks 19 trading days after the event. Thus, the projected date for the peak of the bearish edge relative to the current event date (Thursday, Oct. 30, 2008) is Wednesday, Nov. 26, 2008. The Dow declines in 100% of the cases (9 of 9) by an average of 6.4% relative to the close on the event date. The overall return of the nine cases is -6.4%, which, based on the close of Dow on the event date (9180.69), provides a target price of 8593.13.
S&P 500 Index (SPX) - According to the six previous occurrences of this event, SPX has shown a somewhat bearish edge that peaks 39 trading days after the event. Thus, the projected date for the peak of the bearish edge relative to the current event date (Thursday, Oct. 30, 2008) is Friday, Dec. 26, 2008. SPX declines in 83% of the cases (5 of 6) by an average of 14.2% relative to the close on the event date. The average of the one rally is 8.5%. The overall return of the six cases is -10.5%, which, based on the close of SPX on the event date (954.09), provides a target price of 853.91.
NASDAQ Composite Index (NASD) - According to the four previous occurrences of this event, the Nasdaq COMP has shown a very strong bullish edge that peaks four trading days after the event. Thus, the projected date for the peak of the bullish edge relative to the current event date (Thursday, Oct. 30, 2008) is Wednesday, Nov. 5, 2008. COMP rallies in 100% of the cases (4 of 4) by an average of 4.6% relative to the close on the event date. The overall return of the four cases is 4.6%, which, based on the close of COMP on the event date (1698.52), provides a target price of 1776.65.
We are very bearish for the coming week in stocks. The markets are already discounting an Obama victory, and retirement-ready baby boomers have already been heading for the exits in stocks to get into 'safer' investments just because that makes sense at this time in their lives.
Anthony Kolton is president of Logical Information Machines and Markethistory.com, Inc.Gibbons Burke is editor of MarketHistory.com.
