Comparing SP500 Percentage Drops in 2009 to Now

Jan 22, 2010: 12:50 PM CST

With the market in a pullback retracement mode currently, I thought it would be a good idea to look back at the S&P 500 rally off the March 2009 lows and get a sense of what to expect in terms of the average pullback.

Let’s take a look.

Using TradeStation, I’m showing the percentage decline, time span, and point decline feature of the basic trendline tool.

I started with swing highs and drew to swing lows to assess the values of the decline to get an average of what to expect now that we are in pullback mode.

As you can see from the chart, we only had four ‘meaningful’ pullbacks (unless you count the brief May and early August mini-retracements).

The pullbacks include the following:

June: -9.10%
August: -4.41%
September: -5.57%
October: -6.42%

Average: -6.37%

Current Retracement (as of mid-day January 22):  Down 3.75%

If the current correction/retracement is in line with the recent average, then we could be looking for an 80 point drop from the high to the 1,080 level.

Anything beyond 7% would clue us in that something else might be going on (a deeper than normal correction) and anything exceeding 10% (10% is a 115 point drop from the high to the 1,035 level) would indicate that odds favored a drop to 1,000 or lower.

Watch the current 1,100 level for a potential short-term support level.

Use this as a quick reference guide when trying to assess likely support zones or ‘stopping points’ for the market in retracement mode.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

10 Comments

10 Responses to “Comparing SP500 Percentage Drops in 2009 to Now”

  1. Diggy - Forexhabits.com Says:

    Hey Corey!
    I found your site a couple days ago and I'm really impressed. It's hard to find good forex blogs and I'm happy I found yours! I'm just doing forex analysis on my own site but I also follow the indices.

    I think that it is finally game-over for this massive rally that has lasted 9 months from the march 09 bottom. The rising wedge that it has formed over those 9 months has finally broken to the downside, and as you know rising wedges are bearish. For now my targets on the SP500 are 1080 and then 1050. I have a strong opinion that we will see sub 1000 levels later in the SP this year, maybe even sub 900.

    Keep the good analysis coming and it will be good to learn from each other!
    Diggy

  2. Corey Rosenbloom, CMT Says:

    Thanks Diggy!

    It's so hard to bet against this bull market, so I want to see critical levels broken – like 1,080 – before thinking this is “the” correction, as this market has shown strong resilience.

    But there's a lot of cross-currents going against the market now, so we'll keep watching and targeting the lower levels!

    All the best!

  3. Argonath Says:

    The DJIA lost the current high line that was supporting the last corrections, the situation seems to be more dramatic than the normal waves of the second half of 2009. Of course there alot of important supports that need to be cross, but we need to stay with eyes opened to not let the earnings of 2009 get lost.

  4. Corey Rosenbloom, CMT Says:

    Good point, Argonath!

    In a bull market (we are on the daily chart), there are more levels of support to watch, but we've broken a few key ones (moving averages) so we need to watch closely.

    We also just turned negative (returns) on the year so that is frustrating to the bulls.

  5. mikevadon Says:

    Looks like Cramer is calling the bottom.

    http://bit.ly/8Xpib7

  6. philzuco Says:

    Corey,
    Great website. As to your post comparing this slide with other previous corrections since the March 09 bottom, I would argue that bellwether stocks are a good indication that the market is in fact turning south now — in other words, this isn't just another run-of-the-mill pullback. Bellwethers of note: GOOG (just a hair away from breaking its 100-day MA — hasn't happened since March 09), AAPL (closed below its 9-month-long trendline on Friday), GS (wide-range-bar close below the 200-day MA on Friday — hasn't traded below the 200-day MA since late March/early April 09).

    In other words, there's a strong indication that this market has run it's course. I'm not short yet, but I'd like to see a one or 2-day retracement on the indices for a golden shorting opportunity.

    Keep up the good work on the site!

  7. Carlos Júlio Says:

    I have the same ideia.
    You can look to EMA200 to and see avg falsebreak that EMA give me target between 1040 and 995. Just send my 2 cents. VIX, SPX and DAX. Best for all. Cheers!!

    SPX – We're In A Secular Bear Market. 1040 Key Number
    We're In A Secular Bear Market Like Japan.
    Long term view – TOP 1150 –
    If this is the Top and I believe it, when look this chart, we had last year a pullback of a BIG BEAR MARKET SECULAR. why??
    Chart we have two indicators – EMA and RTS.
    EMA if price close > EMA –> Bull Market
    If price close < EMA –> Bearish
    RTS give me confirmation Bull Market or Bear Mrket.
    Beas until now neutral because price above EMA but RTS below yellow.
    If price close montly below EMA change beas neutral long term to >> Bear Market.
    If close this month below low of last month (1085.89) win momentum to test EMA 1040.
    Chart here: http://3.bp.blogspot.com/_MJqKtyMMr28/S1rtWTHxe

    VIX – The End of the Beginning. Bears are back!

    this is a 52% gain on the VIX (weekly). Wow! Bears are back!
    Close this week above EMA200 (red) but below EMA55.
    Need two consecutive closes above blue EMA (27.86)
    will open door to visited 40 first target, possible extension to 45
    Chart here: http://3.bp.blogspot.com/_MJqKtyMMr28/S1pPMimIp

    DAX – Weekly – Top with two Bearish Signals

    Dax have here a big problem. Bearish divergence with a new sell signal MACD. This is bad…very bad…
    Can see last update Daily chart http://followmarketrend.blogspot.com/2010/01/da
    weekly chart here: http://4.bp.blogspot.com/_MJqKtyMMr28/S1o6BVriI

    Big trades for all.

  8. Carlos Júlio Says:

    I have the same ideia.
    You can look to EMA200 to and see avg falsebreak that EMA give me target between 1040 and 995. Just send my 2 cents. VIX, SPX and DAX. Best for all. Cheers!!

    SPX – We're In A Secular Bear Market. 1040 Key Number
    We're In A Secular Bear Market Like Japan.
    Long term view – TOP 1150 –
    If this is the Top and I believe it, when look this chart, we had last year a pullback of a BIG BEAR MARKET SECULAR. why??
    Chart we have two indicators – EMA and RTS.
    EMA if price close > EMA –> Bull Market
    If price close < EMA –> Bearish
    RTS give me confirmation Bull Market or Bear Mrket.
    Beas until now neutral because price above EMA but RTS below yellow.
    If price close montly below EMA change beas neutral long term to >> Bear Market.
    If close this month below low of last month (1085.89) win momentum to test EMA 1040.
    Chart here: http://3.bp.blogspot.com/_MJqKtyMMr28/S1rtWTHxe

    VIX – The End of the Beginning. Bears are back!

    this is a 52% gain on the VIX (weekly). Wow! Bears are back!
    Close this week above EMA200 (red) but below EMA55.
    Need two consecutive closes above blue EMA (27.86)
    will open door to visited 40 first target, possible extension to 45
    Chart here: http://3.bp.blogspot.com/_MJqKtyMMr28/S1pPMimIp

    DAX – Weekly – Top with two Bearish Signals

    Dax have here a big problem. Bearish divergence with a new sell signal MACD. This is bad…very bad…
    Can see last update Daily chart http://followmarketrend.blogspot.com/2010/01/da
    weekly chart here: http://4.bp.blogspot.com/_MJqKtyMMr28/S1o6BVriI

    Big trades for all.

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