Stormy Conditions


Ron Rowland Image Ron Rowland Editor, All Star Fund Trader

Hurricane Harvey grew from a simple tropical depression to a Category 4 killer storm. Experts are saying that its 42-hour metamorphosis was the fastest ever, notes Ron Rowland, editor of Invest with an Edge.

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While the change from a bull to a bear market does not tend to be as fast as Harvey’s speedy transformation, it still happens relatively quickly. The 1987 turnaround is an example.

The S&P 500 had hit an all-time high on August 25 of that year. By October 19, 39 days later, the market had lost 30% of its value.

In 2000, the top occurred on March 24, before a 50%-plus slide that ended in 2003. But it took just 15 days for the first 5% to be lost, and 16 days for the losses to exceed 10%.

The last 50%-plus slide in the S&P 500 began in October 2007 and ended in 2009. In just 21 trading days, the Index fell its first 5%—by day 62, it had lost more than 10%.

What signaled each of these precipitous declines? A failure to set yet another new high occurred relatively quickly in each case.

In 1987, an attempt was made just 29 trading days after the new high. It fell eight points short (0.25%) of doing so.

In 2000, the assault on a new high occurred 11 trading days after reaching these heights.