What Happens After the S&P 500 Gains 1% for Three Straight Days?

The S&P 500 is up 1% or more for three straight days, as of yesterday (February 17). This is the first time this three-day streak has occurred since October 2011. The last time it made it to four straight days was in October 1982. Getting to four straight is very rare; the past 20 times the S&P 500 was up 1% on three straight days, it didn’t gain 1% on the fourth day. In fact, since 1950, it has made it to four straight 1% gains only three times.

Taking a closer look at the past three days, the S&P 500 has gained 5.4%, which is the best three-day rally since the August 2015 lows. This is the 30th time the S&P 500 has gained 1% or more on three straight days since 1970. The median return two weeks later is 1.1% and a month later is 1.6%.

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Source: LPL Research, FactSet 02/17/16

 

We’ve noted before that the largest moves tend to happen beneath the 200-day moving average. With the S&P 500 currently below that long-term trend line, does this matter? As it turns out, returns after three straight 1% gains are weaker if they take place beneath the 200-day moving average.

 
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Source: LPL Research, FactSet 02/17/16

 

Lastly, what really stands out about the past three days is the S&P 500 also closed near its high each day, in addition to gaining 1% or more each day. This has only happened four times in the past 30 years and the S&P 500 is up by an impressive average of 2.8% a month later with a median return of 3.0%.

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Source: LPL Research, FactSet 02/17/16

IMPORTANT DISCLOSURES

Past performance is no guarantee of future results.

The economic forecasts set forth in the presentation may not develop as predicted.

The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security. All performance referenced is historical and is no guarantee of future results. All indexes are unmanaged and cannot be invested into directly.

Stock investing involves risk including loss of principal.

The S&P 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

This research material has been prepared by LPL Financial LLC.

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