At the close on Friday, the S&P 500 was trading lower than the previous week. That was a historic event.
It was the seventh consecutive week of decline for the index. With data from 1928, this was only the fourth time there had been a losing streak of this length.
Although the sample size is small, it helps to consider history.
A previous streak occurred in 2001. That was in the midst of a historic bear market.
The bear market of the early 2000s was historic
The losses came about a year after the bear market began. Despite rallying after the losing streak, the bear market continued for another 18 months. The selling pressure in early 2001 was only part of the trend.
We’ve seen this before in the S&P 500
Before that, we have to go back to 1980 to find a similar losing streak. That was in April 1980. The S&P 500 was in an uptrend at the time.
The sell-off in shares coincided with the crash in the silver market after the Hunt brothers’ corner failed.
The Hunt brothers were wealthy oil barons who wanted to own as much silver as possible. They used futures markets and borrowed money to build a large position. Their plan collapsed when they failed to meet a margin call.
The sell-off in silver spilled over into the stock market making this a unique case.
The first seven-week losing streak ended in May 1970.
The end of the bad luck
At that time, inflation was rising. The White House assured investors it had a plan. But traders did not believe this story. The Nixon administration took office in January 1969 and failed to move the economy forward.
Flash-forward to May 1970. The deeply divided nation was preparing for midterm elections in less than six months.
That all sounds familiar. Swap Nixon for Biden, update the data and you could be talking about today.
bottom line: There are differences, but there is room for optimism based on history – a stock rally is imminent.
Michael Carr is the publisher of True Options Masters, One Trade, Peak Velocity Trader and Precision Profits. He teaches Technical Analysis and Quantitative Technical Analysis at the New York Institute of Finance. Follow him on Twitter @MichaelCarrGuru.
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