The S&P fell over 3% today. I wondered what usually happens after a 3% fall.

Over the past 30 years, the S&P has fallen 3% or more on 75 occasions (excluding today). On 47 occasions the market rose the day after; on 28 it fell.

The picture for platinum, which also fell over 3%, is more evenly balanced. Since June 2001 (I don’t have data before that), platinum has fallen 3% or more on 72 occasions. On 37 it rose the day after, and on 35 it fell.

If we exclude outliers, the picture isn’t much different. The S&P, for example, fell between 3% and 4% on 40 occasions in the past 30 years. On 23 of these it rose the following day, and on 17 it fell.

Add to this the fact that the reading for downside breakout momentum (does the market rise or fall the day after a breakout) is 37%, and the odds seem to favour a bounce in the S&P tomorrow.

Update: 21/05/10 15:50 Limp bounce in progress.