Stock Market Biggest Selloff in Over Seven Months

By: PhilStockWorld

Courtesy of Doug Short: Pre-market futures gave little clue as to the direction of today’s action. The S&P 500 opened fractionally lower and hit its 0.13% intraday high seven minutes later. The 10 AM weak ISM Manufacturing Report triggered the most aggressive selling during the day, but the general direction was fairly steadily downward to the index’s -2.41% intraday low about 10 minutes before the closing bell. At the final tally the index trimmed its loss to 2.28%, its biggest one-day drop since June 20th of last year. As a volatility metric, today’s intraday percent range was the largest since November of 2012.

The yield on the 10-year note fell 6 bps to 2.61%. The interim high was 3.04% at the end of 2013.

A daily chart shows that 2014 is off to a very weak start. Volume has been generally higher on the down days, and today’s volume was the highest of the year.

Here is a look at the S&P 500 drawdowns (percent off highs) since the market bottom on March 9, 2009. I’ve highlighted the declines in excess of 5%. Today’s closed marked a new member to the red-dot club, a 5.76% drawdown from the all-time closing high on January 15th. Intrestingly enough, to two decimal places, the current drawdown matches the previous one in June of last year. The traditional definition of a “correction” is a 10% decline.

The S&P 500 is now down 5.76% for 2014.

Here is a longer perspective, starting with the all-time high prior to the Great Recession.

For a better sense of how these declines figure into a larger historical context, here’s a long-term view of secular bull and bear markets in the S&P Composite since 1871.

- Phil

www.philstockworld.com

Philip R. Davis is a founder of Phil's Stock World (www.philstockworld.com), a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders. Mr. Davis is a serial entrepreneur, having founded software company Accu-Title, a real estate title insurance software solution, and is also the President of the Delphi Consulting Corp., an M&A consulting firm that helps large and small companies obtain funding and close deals. He was also the founder of Accu-Search, a property data corporation that was sold to DataTrace in 2004 and Personality Plus, a precursor to eHarmony.com. Phil was a former editor of a UMass/Amherst humor magazine and it shows in his writing -- which is filled with colorful commentary along with very specific ideas on stock option purchases (Phil rarely holds actual stocks). Visit: Phil's Stock World (www.philstockworld.com)

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