Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
Some interesting data from Jeff Saut of Raymond James if you are a data hound like I am.
Since 1928 there have been 294 pullbacks of at least 5%. Ninety four of them have been moderate (>10%), 43 have been severe (>15%) and 25 have been bear markets (>20%).
So in a statistical sense once you hit the 5% threshold your chances of a 10%, 15%, and 20%+ drop are as follows:
10%: 32.0%
15%: 14.6%
20%+: 8.5%
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This is interesting in light of the pullbacks of 2011 and 2010 – while there is only a 8.5% probability of a pullback of that nature, we’ve seen it happen in each of the last two iterations prior to 2012. Of course we are now in the 10% pullback category which occurs about 1/3rd of the time there is a 5% pullback.
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