It seems we could be on the brink of a sizable drop in the S&P 500 if we consider a certain data metric. Market Technician Wayne Whaley recently shared an intriguing insight on Twitter.
He pointed out that this year’s first three weeks of February saw the market lose 0.45%. Historically, since 1950, when the first three weeks of February have been negative, the following year—from February 21 to February 21—saw the market end up slightly positive with an average gain of 6.21%, recording positive outcomes in 21 out of 33 occasions. However, there’s a more compelling story behind these numbers.
In an effort to spot Bear Market Warning signals, I once tasked my computer with identifying any time spans that could reliably predict a drop of 10% or more in the following year. Among the few timeframes that surfaced with statistical significance was a “Negative First 3 Weeks of February.” Intriguingly, every instance of the S&P experiencing a double-digit decline from one February to the next since 1950 was preceded by a dip in those initial February weeks.
This discovery is noteworthy because it reveals a pattern that might be underestimated by many investors. While past performance is never a perfect indicator of future results, this historical correlation offers a perspective worth considering for those trying to anticipate substantial market downturns. Will history repeat itself this time? Only time will tell, but it’s certainly something that market watchers will be keeping a close eye on.
