Monday, October 13, 2014

Largest SPX Pullback of 2014 Hits 6.4%

Every time there is a pullback, it seems as if I receive multiple requests for an updated version of the table below. With the S&P 500 index reeling and still trying to find a bottom, this looks like a good time to put the current pullback in the context of the 27 most significant peak-to-trough declines from new highs since the SPX bottomed in March 2009.

Note that the current 6.4% decline from the September 19th high of 2019 is roughly average in terms of duration, but makes it the second largest pullback in percentage terms since 2012, just eclipsing the January-February 2014 pullback, when emerging markets (EEM) and Crimea were weighing heavily on the minds of investors.

Keep in mind that as ugly has things have been in the SPX, the Russell 2000 small cap index (RUT) is down 13.8% since topping out in early July, while the NASDAQ composite index is down 8.5% since its mid-September top. Of course, some sectors have been hit even harder, with oil and gas exploration and production (XOP) down 33.3% from its 2014 high. Semiconductors (SMH) have declined 14.4% from their 2014 high, yet that high was established less than a month ago.

There is never an easy answer to the question of whether this has been enough pain to warrant a bottom, but after the events of the past week, all sorts of extreme scenarios now seem much more plausible.

SPXpullbackchartasof101314_zps5ff1c9f6[1]

[source(s): Yahoo, VIX and More]

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